Oil prices spike on OPEC production cut

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

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!”