November 30, 2016 — 8:24 AM EST
OPEC clinched a deal to curtail oil supply, confounding skeptics as the need to clear a record global crude glut — and prove the group’s credibility — brought about its first cuts in eight years, Bloomberg News reports.
OPEC will reduce production by 1.2 million barrels a day to 32.5 million a day, a delegate said Wednesday in Vienna, asking not to be identified as the decision isn’t yet public. Oil jumped 7.6 percent to $49.90 a barrel in London at 1:23 p.m. local time.
After weeks of often tense negotiations, the Organization of Petroleum Exporting Countries’ three biggest producers — Saudi Arabia, Iraq and Iran — resolved differences over sharing the burden of cuts to rein in supply for the first time since 2008. Notably, it appears the Saudis accepted that Iran, as a special case, can raise production to about 3.9 million barrels a day. The agreement is also likely to include a reduction of about 600,000 barrels a day by non-OPEC countries.
Saudi Oil Minister Khalid al-Falih (L) walks alongside his Russian counterpart Alexander Novak (R) during their meeting in Riyadh on October 23, 2016.Falih said that the current down cycle of crude prices is close to an end as market fundamentals improve. ‘The current down cycle is nearing an end,’ Falih told a joint press conference with Novak after a Gulf ministerial meeting in Riyadh. / AFP / FAYEZ NURELDINE (Photo credit should read FAYEZ NURELDINE/AFP/Getty Images)
OPEC clinched a deal to curtail oil supply, confounding skeptics as the need to clear a record global crude glut — and prove the group’s credibility — brought about its first cuts in eight years.
“This should be a wake-up call for skeptics who have argued the death of OPEC,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. “The group wants to push inventories down.”
OPEC will reduce production by 1.2 million barrels a day to 32.5 million a day, two delegates said Wednesday during a ministerial meeting in Vienna, asking not to be identified as the decision isn’t yet public. Benchmark Brent crude rose 8 percent to $50.07 a barrel in London at 1:37 p.m. local time.
Morgan Stanley said Monday that an OPEC agreement could boost crude prices by $5 or more. While the deal is unlikely to be enough to wipe out the crude glut entirely — OPEC’s own estimates show it needs to pump just 31.9 million barrels a day from January to June to balance supply and demand — it clears the way for participation by non-OPEC suppliers, chiefly Russia.
Russia, the biggest producer outside the bloc, has said if OPEC agrees on individual country quotas it’s ready to participate, including possibly reducing its output, a person familiar with Russian thinking said earlier. That would mark a reversal of its previous position.
Tags: Alexander Novak, Bloomberg News, curtail oil supply, cut production, global crude glut, Iran, Iraq, oil prices, OPEC, Organization of Petroleum Exporting Countries, Russia, Saudi Arabia, Saudi Oil Minister Khalid al-Falih