Opec, Rus­sia agree to slash oil out­put de­spite Trump pres­sure

Oman Daily Observer - - INTERNATIONAL -

VIENNA: Opec and its Rus­sia-led al­lies agreed on Fri­day to slash oil pro­duc­tion by more than the mar­ket had ex­pected de­spite pres­sure from US Pres­i­dent Don­ald Trump to re­duce the price of crude.

The pro­ducer club will curb out­put from Jan­uary by 0.8 mil­lion bar­rels per day ver­sus Oc­to­ber lev­els while nonopec al­lies con­trib­ute an ad­di­tional 0.4 mil­lion bpd of cuts, in a move to be re­viewed at a meeting in April.

Oil prices jumped about 5 per cent to more than $63 a bar­rel as the com­bined cut of 1.2 mil­lion bpd was larger than the min­i­mum 1 mil­lion bpd that the mar­ket had ex­pected.

Saudi Ara­bia, de facto leader of the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries, has faced de­mands from Trump to help the global econ­omy by re­frain­ing from par­ing sup­plies.

An out­put cur­tail­ment also would pro­vide sup­port to Iran by in­creas­ing the price of oil amid at­tempts by Washington to squeeze the econ­omy of Opec’s third-largest pro­ducer.

Asked whether the de­ci­sion to cut could sour Riyadh’s re­la­tions with Washington, Saudi En­ergy Minister Khalid al Falih told re­porters the king­dom was ready to pump more should a ma­jor sup­ply out­age oc­cur.

“We will not squeeze con­sumers be­yond what they can af­ford,” he said, ad­ding that given the United States had re­cently be­come the big­gest oil-pro­duc­ing na­tion, its en­ergy com­pa­nies were “breath­ing a sigh of re­lief”.

The Opec deal had hung in the bal­ance for two days — first on fears that Rus­sia would cut too lit­tle, and later on con­cerns that Iran, whose crude ex­ports have been de­pleted by US sanc­tions, would re­ceive no ex­emp­tion and block the agree­ment.

But af­ter hours of talks, Iran gave Opec the green light and Rus­sia said it was ready to cut more.

Rus­sia gave a com­mit­ment to re­duce out­put by 228,000 bpd from Oc­to­ber lev­els of 11.4 mil­lion bpd, though it said the cuts would be grad­ual and take place over sev­eral months.

The coun­try’s en­ergy minister, Alexan­der No­vak, said Rus­sian Pres­i­dent Vladimir Putin had dis­cussed an out­put de­crease with Saudi. Iraq, Opec’s sec­ond-largest pro­ducer, pledged to cut 140,000 bpd. Falih said Saudi pro­duc­tion had dropped to 10.7 mil­lion bpd in De­cem­ber from 11.1 mil­lion in Novem­ber and was set to de­cline to 10.2 mil­lion bpd in Jan­uary.

Iran, Libya and Venezuela were ef­fec­tively given ex­emp­tions. Nige­ria, which has been ex­empt since the pre­vi­ous round of cuts from Jan­uary 2017, agreed to par­tic­i­pate.

He­lima Croft, manag­ing direc­tor at RBC Cap­i­tal Mar­kets, said the deal ex­ceeded ex­pec­ta­tions.

“Hav­ing the next meeting in April will be im­por­tant for plan­ning pur­poses to speed the cy­cle up a bit,” she said. Opec nor­mally meets once ev­ery six months.

“We don’t know what will Iran’s sanc­tions pic­ture look like. We don’t know the Ira­nian vol­umes which will be com­ing off the mar­ket,” Croft said.

But Bob Mcnally, pres­i­dent of Usbased Rap­i­dan En­ergy Group, said the de­tails of the cut were “fuzzy” and would likely re­sult in a lesser re­duc­tion than the head­line fig­ure.

“Pres­i­dent Trump will not be happy to see to­day’s head­lines, but how strongly he re­acts de­pends mainly on whether crude prices rise strongly as a re­sult in com­ing days and weeks.” US spe­cial rep­re­sen­ta­tive for Iran Brian Hook met Falih in Vienna this week, in an un­prece­dented devel­op­ment ahead of an Opec meeting.

(L-R) Rus­sian Minister of En­ergy Alexan­der No­vak, Opec Pres­i­dent UAE En­ergy Minister Suhail al Mazrouei and Opec Sec­re­tary-gen­eral Mo­hammed Sanusi Barkindo of Nige­ria speak dur­ing the 175th Opec Con­fer­ence in Vienna, Aus­tria.

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