Oil Prices Surge 4% on Opec-led Out­put Cuts of 1.2 M bpd

The Economic Times - - Around The World -

prices jumped more than 4% on Fri­day as Saudi Ara­bia and other pro­duc­ers in Opec, as well as al­lies like Rus­sia agreed to re­duce out­put to drain global fuel in­ven­to­ries and sup­port the mar­ket.

The Or­gan­i­sa­tion of the Pe­tro­leum Ex­port­ing Coun­tries and its Rus­sia-led al­lies, re­ferred to as "OPEC+," agreed to slash pro­duc­tion by a com­bined 1.2 mil­lion bar­rels per day from 2019, larger than the min­i­mum 1 mil­lion bpd that the mar­ket had ex­pected, de­spite pres­sure from US Pres­i­dent Don­ald Trump to re­duce the price of crude.

The pro­ducer club will curb out­put by 800,000 bpd from Jan­uary while non-Opec al­lies con­trib­ute an ad­di­tional 400,000 bpd of cuts, Iraqi Oil Min­is­ter Thamer Ghad­hban said af­ter Opec con­cluded two days of talks in Vi­enna.

Rus­sian En­ergy Min­is­ter Alexan­der No­vak con­firmed the com­bined out­put cuts of 1.2 mil­lion bpd, say­ing that the mar­ket will be over­sup­plied through the first half of the year.

Brent crude rose $2.94 to $63.00 a bar­rel by 11:20 a.m. EDT (1620 GMT). In early trade, the global bench­mark fell be­low $60 when it looked as if oil ex­porters might leave pro­duc­tion tar­gets un­changed. The bench­mark ral­lied to a ses­sion high of $63.73 on news of the agree­ment.

US crude was on track to end the week up 5.2% and Brent was 6.9% higher on the week so far.

A 1.2 mil­lion-bpd cut, if im­ple­mented fully, "should be enough to largely at­ten­u­ate, but not elim­i­nate, ex­pected im­plied global in­ven­tory builds in the first half of next year,” said Harry Tchilin­guirian, global oil strate­gist at BNP Paribas in Lon­don told the Reuters Global Oil Fo­rum.

Oil prices have plunged 30% since Oc­to­ber as sup­ply has surged and global de­mand growth has weak­ened.

Prices fell al­most 3% on Thurs­day af­ter OPEC ended a meet­ing in Vi­enna with only a ten­ta­tive deal to tackle weak prices. Talks with other pro­duc­ers were held on Fri­day. But Iran gave OPEC the green light on Fri­day to re­duce oil out­put af­ter find­ing a com­pro­mise with ri­val Saudi Ara­bia over a pos­si­ble ex­emp­tion from the cuts, an OPEC source said.

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