Middle East uncertainty complicates OPEC meeting - 19 Action News|Cleveland, OH|News, Weather, Sports

Middle East uncertainty complicates OPEC meeting

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The OPEC countries - dominated by the major players of the Middle East - have enjoyed triple digit oil prices, meaning $100 or more, for three years. (Source: CNN) The OPEC countries - dominated by the major players of the Middle East - have enjoyed triple digit oil prices, meaning $100 or more, for three years. (Source: CNN)

VIENNA (CNN) - Energy ministers gather at the OPEC Secretariat in Vienna on Wednesday with uncertainty in the Middle East changing the overarching agenda. In focus this time was how to manage the rise of production from Iraq and Iran.

A violent insurgence by ISIS in Mosul, Iraq, and complications on the path to an agreement between the P5 +1 and Iran over its nuclear program are quickly altering the dynamics around the expansive negotiating table.

Chaos continues to reign in eastern Libya, which has brought down the country's production to an eighth of its pre-war average of 1.6 million barrels a day.

The ministers will have no problem addressing the first item on their checklist, which is keeping their daily production at 30 million barrels a day.

This means strategists say that the cartel's traditional swing producer Saudi Arabia, the one that balances market demand for OPEC crude, may need to step in to produce a record 11 million barrels a day to fill a potential void.

The kingdom moved to increase production capacity to 12.5 million barrels a day when the former government in Iran threatened to chock off exports through the Strait of Hormuz.

The situation could be much worse for the group that produces about 40 percent of the world's daily oil output. These countries - dominated by the major players of the Middle East - have enjoyed triple digit oil prices, meaning $100 or more, for three years.

This has kept export revenues within OPEC above $1 trillion since 2011. So far, the same scenario is playing out in 2014. Four investment banks raised their annual forecasts for North Sea Brent based on the uncertainty that prevails over supply.

At the same time, Paris-based think tank the International Energy Agency said that OPEC production would need to rise in the second half since inventories for April were at their lowest level since 2008.

That amounts to a 180 degree turn in sentiment from the last time OPEC members convened in December. With North American output at a 30-year high as a result of the shale oil and gas boom, many expected OPEC members to be vying amongst themselves for global market share.

The Middle East uncertainty is allowing OPEC to delay tough decisions. Long-time rivals Iran and Iraq both say they will take production to four million barrels a day in 2015, if geopolitics and violence do not stand in the way.

As nasty as the scenes from Mosul appear, so far they have not impacted production further north in the Kurdish region, nor in the deep south of Iraq, where the real oil bounty is.

Andrey Kuzyaev, president of Lukoil Overseas, the Russian oil group, said back in April "to date we had zero cases of kidnappings and zero terrorist attacks."

That remains the case, and the company plans to move forward with an estimated investment of $36 billion in the West Qurna field near Basra in southern Iraq.

But the situation remains fluid. The Iraqi government was hoping to boost production in Kirkuk, near where the violence has broken out, from its recent low of 260,000 barrels a day. Those plans seems to be in jeopardy as the insurgence spreads.

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