Crude prices hike as pro­duc­tion is cut

Boston Herald - - THE TICKER -

VIENNA — Oil prices spiked sharply higher yesterday as ma­jor oil pro­duc­ers, in­clud­ing the OPEC car­tel, agreed to cut global oil pro­duc­tion by 1.2 mil­lion bar­rels a day to re­duce over­sup­ply.

Fol­low­ing two days of meet­ings, the Or­ga­ni­za­tion of the Petroleum Ex­port­ing Coun­tries that in­cludes the likes of Saudi Ara­bia and Iraq said they would cut 800,000 bar­rels per day for six months from Jan­uary, though some coun­tries such as Iran, which is fac­ing wide-rang­ing sanc­tions from the United States, have been given an ex­emp­tion.

The bal­ance will come from Rus­sia and other non-OPEC coun­tries. The United States, one of the world’s big­gest pro­duc­ers, is not part of the deal.

“This is a ma­jor step for­ward,” said United Arab Emi­rates’ En­ergy Minister Suhail Mo­hamed al-Mazrouei, who chairs the reg­u­lar meet­ings in Vienna in his ca­pac­ity as Pres­i­dent of the OPEC Con­fer­ence.

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 fallen about 25 per­cent re­cently be­cause ma­jor pro­duc­ers — in­clud­ing the U.S. — are pump­ing oil at high rates.

The news pushed crude oil prices higher. U.S. benchmark crude rose 2.2 per­cent to $52.61 a bar­rel in New York. Brent crude, used to price in­ter­na­tional oils, gained 2.7 per­cent to $61.67 a bar­rel in Lon­don.

Ann-Louise Hit­tle, a vice pres­i­dent at oil in­dus­try ex­pert Wood Macken­zie, said the pro­duc­tion cut “would tighten” the oil mar­ket by the third quar­ter next year and help lift Brent prices back above $70 per bar­rel.

“For most nations, self­in­ter­est ul­ti­mately pre­vails,” she said. “Saudi Ara­bia has a long-term goal of man­ag­ing the oil mar­ket to avoid the sharp falls and spikes which hurt de­mand and the abil­ity of the in­dus­try to de­velop sup­ply. On top of this, Saudi Ara­bia also needs higher oil rev­enues to fund do­mes­tic Saudi spend­ing.”

GETTY IM­AGES

BAR­REL BAL­ANCE: Above from left, Rus­sian Minister of En­ergy Alexan­der No­vak, Khalid Al-Falih, the minister of En­ergy, In­dus­try and Min­eral Re­sources of Saudi Ara­bia, and Minister of En­ergy of the United Arab Emi­rates Suhail Mo­hamed Al Mazrouei meet to dis­cuss oil pro­duc­tion. A flare on an oil ship, be­low, is seen off the coast of An­gola.

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