OPEC agrees to cut crude oil pro­duc­tion

Prices rise, but moves by US, Rus­sia could off­set the de­ci­sion

China Daily (USA) - - BUSINESS - By YANG ZI­MAN and LYUCHANG Con­tact the writ­ers at yangz­i­man@chi­nadaily.com.cn and lvchang@chi­nadaily.com.cn

The Or­ga­ni­za­tion ofPetroleum Ex­port­ing Coun­tries, or OPEC, made a de­ci­sion to cut daily oil out­put by 700,000 bar­rels.

The de­ci­sion has driven up oil prices up close to $50 per bar­rel. The WTI Crude Oil Spot Price in­creased by $2.38 to $47.05 per bar­rel on Wed­nes­day, up 5.33 per­cent from the pre­vi­ous day. Brent Crude Oil Fu­tures Prices in­creased by 5.92 per­cent to $48.69 per bar­rel on the same day.

Ac­cord­ing to Reuters, OPEC has reached a con­sen­sus to keep its daily pro­duc­tion within 32.5-33 mil­lion bar­rels per day, com­pared with 33.2 mil­lion tons per day in Au­gust. It is the or­ga­ni­za­tion’s first de­ci­sion to con­trol oil out­put since 2008.

China Oil­field Ser­vices Ltd shares in­creased by 11.3 per­cent to HK$6.8 per share on the Hong Kong Stock Ex­change on Wed­nes­day, the big­gest in­crease since Feb 18. China Na­tional Off­shore Oil Corp saw its H shares up 5 per­cent to HK$9.7 per share onWed­nes­day.

Gao Jian, an oil an­a­lyst with Shan­dong-based bulk com­mod­ity in­for­ma­tion com­pany Sub­lime China In­for­ma­tion Group Co Ltd, said that OPEC’s out­put re­duc­tion is un­likely to have sub­stan­tial im­pact onoil prices in the long run.

“Now is the lean sea­son for oil con­sump­tion. Over­all en­ergy de­mand re­mains weak. In­vestors will still fo­cus on the ba­sic sup­ply and de­mand,” he said.

Gao said that the out­put of other ma­jor oil ex­porters needs to be taken into ac­count, such as Rus­sia and the United States.

“If Rus­sia and the US in­crease their oil out­put, it will off­set OPEC’s re­duc­tion,” said Gao.

Ac­cord­ing to Rus­sia’s min­istry of en­ergy in­for­ma­tion, the coun­try’s crude and con­den­sate oil out­put stood at 11.1 mil­lion bar­rels per day as of Sept 20, up from 10.7 mil­lion bar­rels per day in Au­gust.

Rus­sian Pres­i­dent Vladimir Putin has re­cently an­nounced the open­ing of new oil­fields, which will in­crease the na­tion’s crude oil out­put by 600,000 met­ric tons.

Mean­while, Libya is plan­ning to re­open the oil ex­port in Port Ras Lanuf. Nige­ria’s For­ca­dos Port will re­sume crude oil trade by the end of Septem­ber, the first time since Fe­bru­ary.

Ac­cord­ing to a re­port by Gold­man Sachs, OPEC’s out­put lim­i­ta­tion will drive up oil prices in the short run. How­ever, un­cer­tainty will re­main in the oil mar­ket in the com­ing months. Since the re­duc­tion agree­ment won’t be of­fi­cially ap­proved un­til the end of Novem­ber, its im­pact on oil prices in the short run is also lim­ited.


A worker checks the valve of an oil pipe at Al-Sheiba oil re­fin­ery in Basra, Iraq.

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