Oil prices re­cover af­ter Opec agrees to cut out­put

The Guardian - - FINANCIAL - Adam Vaughan En­ergy cor­re­spon­dent

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.

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