Oil prices recover after Opec agrees to cut output
Oil prices have rallied after major producers agreed a deeper-thanexpected cut in output yesterday, recovering the losses of the previous day, when oil-rich states failed to reach a deal.
Opec and allies including Russia, which together account for half of the world’s oil production, have committed to reducing output by about 1.2m barrels a day.
The price of international benchmark Brent crude has dropped by a third since the start of October to about $60 a barrel owing to fears the market is oversupplied.
But prices rose nearly 3% on Friday to $62.92 a barrel after the oil cartel and its partners reached a deal.
At a meeting in Vienna this week oil ministers have been trying to plot a course between protecting their revenues and avoiding angering the US president, Donald Trump, who has urged Opec against stopping the oil flowing and pushing prices higher.
Ann-Louise Hittle, of the oil and gas analysts Wood Mackenzie, said: “[The deal] looks supportive for oil prices. It will help the market deal with the strong US supply growth we are expecting next year of 1.8m barrels a day year on year. It leaves room for an increase [in prices too].”
However, experts were split on how much prices might rise by. Hittle and Investec bank said Brent could return to $70 a barrel next year, while others said a bigger cut was required to reach that level.
The deal is likely to stabilise prices at between $60 and $65 a barrel, according to the financial services firm Cantor Fitzgerald Europe.
Russia was reluctant to reduce output at the meeting. But it has agreed to shoulder more of the burden than expected, at about 17% of the total cut, with a similar amount covered by other non-Opec partners, and the oil cartel making up the rest.