Oil producers join forces and cut production again


Oil prices spiked sharply higher Friday as major oil producers, including the OPEC cartel, agreed to cut global oil production by 1.2 million barrels a day to reduce oversupply.

Following two days of meetings, the Organization of the Petroleum Exporting Countries that includes the likes of Saudi Arabia and Iraq said they would cut 800,000 barrels per day for six months from January, though some countries such as Iran, which is facing wide-ranging sanctions from the United States, have been given an exemption.

The balance will come from Russia and other non-OPEC countries. The United States, one of the world's biggest producers, is not part of the deal.

"This is a major step forward," said United Arab Emirates' Energy Minister Suhail Mohamed al-Mazrouei, who chairs the regular meetings in Vienna in his capacity as President of the OPEC Conference.

Oil producers have been under pressure to reduce production following a sharp fall in oil prices over the past couple of months. The price of oil has fallen about 25 percent recently because major producers — including the U.S. — are pumping oil at high rates.

The reduction has certainly met with the response hoped for by ministers as it was at the upper end of most predictions. Following the announcement, Brent crude, the international standard, was up $2.79 a barrel, or 4.7 percent, at $62.85. Benchmark New York crude was $2.11, or 4.1 percent, higher at $53.60 a barrel.

Ann-Louise Hittle, a vice president at oil industry expert Wood Mackenzie, said the production cut "would tighten" the oil market by the third quarter next year and help lift Brent prices back above $70 per barrel.

"For most nations, self-interest ultimately prevails," she said. "Saudi Arabia has a long-term goal of managing the oil market to avoid the sharp falls and spikes which hurt demand and the ability of the industry to develop supply. On top of this, Saudi Arabia also needs higher oil revenues to fund domestic Saudi spending."

Russian Energy Minister Alexander Novak called the negotiations with the OPEC nations "fairly challenging" but said the decision "should help the market reach a balanced state."

"I think this is a strong signal to anybody who has doubted it that our cooperation is continuing and we can react to any challenge the market throws at us," he said in Russian through a translator.

OPEC's reliance on non-members like Russia highlights the cartel's waning influence in oil markets, which it had dominated for decades. The OPEC-Russia alliance was made necessary in 2016 to compete with the United States' vastly increased production of oil in recent years. By some estimates, the U.S. this year became the world's top crude producer.

The cut is unlikely to be greeted warmly by U.S. President Donald Trump, who has been pressuring the cartel publicly to maintain production. On Wednesday, he tweeted: "Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!"

One stumbling block to an agreement had been Iran, Saudi Arabia's regional rival and fellow OPEC member, which had been arguing for an exemption to any cuts because its crude exports are already being pinched already by U.S. sanctions.

Al-Mazrouei said that in the end Iran had been given an exemption, as well as Venezuela and Libya.

That "means that the percentage we will contribute among us is going to be a bit higher," he said.

"We within OPEC are committed to distribute the 800 (thousand bpd) among us and deliver on it."

___

Rising reported from Berlin


Reader Comments


Next Up in

Parents of murdered Auburn University student furious killer wants new trial
Parents of murdered Auburn University student furious killer wants new trial

The parents of a Georgia teenager murdered at Auburn University a decade ago are furious that the man convicted of killing her has asked for a new trial. >> Read more trending news  Lauren Burk, from Marietta in metro Atlanta, was a freshman at Auburn University and a graduate of Walton High School.  Investigators say Courtney L. Lockhart...
How to watch the spectacular Geminid meteor shower
How to watch the spectacular Geminid meteor shower

  The Geminid meteor shower is one of the most spectacular light shows of the year. >> Read more trending news  The Geminids are visible every December when the Earth passes through a massive trail of dusty debris from a rocky object named 3200 Phaethon, long thought to be an asteroid or an extinct comet. The particle debris burns up...
Operation Grinch Pinch: Texas police going after porch thieves with GPS trackers
Operation Grinch Pinch: Texas police going after porch thieves with GPS trackers

As more and more Americans turn to online shopping for everything from gifts to groceries, package theft from porches is a growing problem, especially during the holiday season. >> Read more trending news  One Texas police department is taking a different approach in trying to catch porch thieves. Operation Grinch Pinch is a partnership...
Tom Brady sets record for most overall touchdown passes in NFL
Tom Brady sets record for most overall touchdown passes in NFL

Another day, another record for Tom Brady's illustrious career as he set the record for the most overall touchdown passes in NFL history during the Patriots' loss to the Dolphins Sunday. >> Read more trending news  Brady's touchdown pass to Julian Edelman put him at 580 overall career touchdown passes, etching his name in history as the...
Traveler's good deed: Stranger gives first-class seat to Florida mom with baby
Traveler's good deed: Stranger gives first-class seat to Florida mom with baby

Kelsey Rae Zwick has been overwhelmed the past few years.  She and her husband have twin daughters, Lucy and Eva, who had complications at birth and were born at 29 weeks, Yahoo News reported. The infants spent their first few months in the neonatal intensive care unit, followed by months of treatments. Lucy and Eva suffer chronic lung disease...
More Stories