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 worldB次元官网网址檚 biggest producers, is not part of the deal.
B次元官网网址淭his is a major step forward,B次元官网网址� said United Arab EmiratesB次元官网网址� 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 per cent recently because major producers B次元官网网址� including the U.S. B次元官网网址� 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 per cent, at $62.85. Benchmark New York crude was $2.11, or 4.1 per cent, higher at $53.60 a barrel.
Ann-Louise Hittle, a vice-president at oil industry expert Wood Mackenzie, said the production cut B次元官网网址渨ould tightenB次元官网网址� the oil market by the third quarter next year and help lift Brent prices back above $70 per barrel.
B次元官网网址淔or most nations, self-interest ultimately prevails,B次元官网网址� she said. B次元官网网址淪audi 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.B次元官网网址�
Russian Energy Minister Alexander Novak called the negotiations with the OPEC nations B次元官网网址渇airly challengingB次元官网网址� but said the decision B次元官网网址渟hould help the market reach a balanced state.B次元官网网址�
B次元官网网址淚 think this is a strong signal to anybody who has doubted it that our co-operation is continuing and we can react to any challenge the market throws at us,B次元官网网址� he said in Russian through a translator.
OPECB次元官网网址檚 reliance on non-members like Russia highlights the cartelB次元官网网址檚 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 StatesB次元官网网址� vastly increased production of oil in recent years. By some estimates, the U.S. this year became the worldB次元官网网址檚 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: B次元官网网址淗opefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!B次元官网网址�
One stumbling block to an agreement had been Iran, Saudi ArabiaB次元官网网址檚 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 B次元官网网址渕eans that the percentage we will contribute among us is going to be a bit higher,B次元官网网址� he said.
B次元官网网址淲e within OPEC are committed to distribute the 800 (thousand bpd) among us and deliver on it.B次元官网网址�
Anthony Mills, Kiyoko Metzler And David Rising, The Associated Press
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