Oil prices spike on OPEC pro­duc­tion cut

Pro­duc­ers have been un­der pres­sure to re­duce out­put af­ter sharp fall in prices

Toronto Star - - SBJ - THE AS­SO­CI­ATED PRESS

AN­THONY MILLS, KIYOKO MET­ZLER AND DAVID RIS­ING

VIENNA— Oil prices spiked sharply higher Fri­day af­ter OPEC coun­tries agreed to a pro­posal that would see global oil pro­duc­tion re­duced by 1.2 mil­lion bar­rels a day.

Fol­low­ing a morn­ing meet­ing of the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries, Iraq Oil Minister Thamir Ghad­hban told re­porters the pro­posed cut would be made up of 800,000 bar­rels per day from OPEC coun­tries and 400,000 bar­rels per day from Rus­sia and other non-OPEC nations.

His Ira­nian coun­ter­part, Bi­jan Zan­ganeh, con­firmed the pro­posed cuts ahead of a closed­door ses­sion to fi­nal­ize the deal with the non-OPEC coun­tries. He said the cuts were to be­gin Jan.1, for a pe­riod of six months. 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 fall- en about 25 per cent re­cently be­cause ma­jor pro­duc­ers — in­clud­ing the U.S. — are pump­ing oil at high rates.

The mooted re­duc­tion has cer­tainly met with the re­sponse hoped for by min­is­ters. Brent crude, the in­ter­na­tional stan­dard, up $3.11 (U.S.) a bar­rel, or 5.2 per cent, at $63.17. Benchmark New York crude was $2.23, or 4.3 per cent, higher at $53.72 a bar­rel.

The pro­posed cut was in line with the 1 mil­lion to 1.3 mil­lion bar­rels per day ex­pected by an- alysts. Neil Wil­son, chief an­a­lyst for Mar­kets.com, said the cut was at the up­per-end of fore­casts and a “real pos­i­tive.”

“The fact that the OPEC-Rus­sia al­liance is still hold­ing mat­ters as much as the de­tails of the deal it­self,” he said.

Rus­sian En­ergy Minister Alexan­der No­vak did not men­tion the spe­cific pro­posal be­fore the begin­ning of the closed ses­sion, but said he was “con­fi­dent” they would be able to “send a strong mes­sage to the mar­ket, to act with re­solve.”

“I be­lieve that our unity of thought and our re­solve will help us achieve suc­cess in the goal of achiev­ing long-term sus­tain­abil­ity and sta­bil­ity of the mar­ket,” he said.

The cut is un­likely to be greeted warmly by U.S. Pres­i­dent Don­ald Trump, who has been pres­sur­ing the car­tel 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!”

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