‘This is a ma­jor step for­ward’: Oil firms to cut out­put

Saskatoon StarPhoenix - - FP SASKATOON -

VIENNA 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 U.S., 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 is also pres­i­dent of the OPEC Con­fer­ence.

Oil pro­duc­ers have been un­der pres­sure to re­duce out­put af­ter a sharp fall in oil prices over the past few months. The price of oil has fallen about 25 per cent be­cause ma­jor pro­duc­ers — in­clud­ing the U.S. — are pump­ing oil at high rates.

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

Ann-Louise Hit­tle, a vice-pres­i­dent at oil in­dus­try ex­pert Wood Macken­zie, said the cut “would tighten” the oil mar­ket by the third quar­ter next year and help lift Brent prices back above US$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 said the de­ci­sion “should help the mar­ket reach a bal­anced state.”

Suhail Mo­hamed al-Mazrouei

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