Oil producers from around the world join forces and cut production again

Oil producers have been under pressure to reduce production following a sharp fall in oil prices

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 per cent 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 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 “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 co-operation 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.”

Anthony Mills, Kiyoko Metzler And David Rising, The Associated Press

Like us on Facebook and follow us on Twitter.

Just Posted

Maskwacis RCMP hoping to find vehicle in fatal hit and run

Black Jeep Grand Cherokee believed to be involved in early morning incident

Ponoka’s ag society board under scrutiny during AGM

About 80 people attended the society’s AGM, which saw three directors replaced

Ponoka teen pedestrian suffers injuries after pickup collision

A pickup struck a teen on residential streets in Ponoka

UPDATED: Calgary Police receive multiple bomb threats

Similar threats received across Canada and the United States

PHOTOS: Battle of Ponoka basketball action

The first ever senior high basketball league game for both Ponoka high schools was high energy

‘Are we going to play?’ Alberta boy with rare illness no big deal for classmates

Porter Stanley is one of 30 people in the world to be diagnosed with Beare-Stevenson syndrome, a craniofacial disorder.

B.C. securities regulator probes ‘most expansive’ alleged trading scheme in its history

Liht Cannabis Corp states it’s doing internal investigation, welcomes BC Securities Commission probe

Air passenger rights: 6 things about what the Liberals are offering

For 3- to 6-hour delays, compensation is $400. Between 6 and 9 hours, $700. Over 9 hours is $1,000

Missouri poacher ordered to repeatedly watch ‘Bambi’

Sentence comes from one of the largest deer poaching cases in state history

Energy assessment law needed to avoid another Trans Mountain impasse, PM says

Prime Minister Justin Trudeau says he’s overhauling the program

Freeland says corners could not be cut with U.S. arrest request of Huawei exec

2 Canadians have been detained in Beijing since the arrest of Meng Wanzhou, CFO of Huawei Technologies, by the RCMP

Alberta’s oil refinery request prompts renewed interest in Kitimat plan

Publisher David Black pitches Rachel Notley on B.C. coast option

Daughter tells of cat litter scientist’s unlikely bond with Charles Barkley

Barkley says the friendship gave him ‘great memories and great joy’

Canada’s robust credit rating should calm unease about federal deficits: Trudeau

Trudeau says Canada’s long-running triple-A rating means experts have confidence in his government’s approach to the economy

Most Read