Oil pro­duc­ers join forces to cut pro­duc­tion again

The Atlanta Journal-Constitution - - BUSINESS - By An­thony Mills, Kiy­oko Met­zler and David Ris­ing

VIENNA — Oil prices spiked sharply higher Fri­day 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 re­duc­tion has cer­tainly met with the re­sponse hoped for by min­is­ters as it was at the up­per end of most pre­dic­tions. Fol­low­ing the an­nounce­ment, Brent crude, the in­ter­na­tional stan­dard, closed up $1.43 a bar­rel, or 2.4 per­cent, at $61.49.

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, self-in­ter­est 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.”

Rus­sian En­ergy Minister Alexan­der No­vak called the ne­go­ti­a­tions with the OPEC na­tions “fairly chal­leng­ing” but said the de­ci­sion “should help the mar­ket reach a bal­anced state.”

“I think this is a strong sig­nal to any­body who has doubted it that our co­op­er­a­tion is con­tin­u­ing and we can re­act to any chal­lenge the mar­ket throws at us,” he said.

OPEC’s re­liance on non-members such as Rus­sia high­lights the car­tel’s wan­ing in­flu­ence in oil mar­kets, which it had dom­i­nated for decades.

The OPEC-Rus­sia al­liance was made nec­es­sary in 2016 to compete with the United States’ vastly in­creased pro­duc­tion of oil in re­cent years. By some es­ti­mates, the U.S. this year be­came the world’s top crude pro­ducer.

The cut is un­likely to be greeted warmly by Pres­i­dent Don­ald Trump, who has been pres­sur­ing the car­tel pub­licly to main­tain pro­duc­tion.

On Wed­nes­day, he tweeted: “Hope­fully OPEC will be keep­ing oil flows as is, not re­stricted. The World does not want to see, or need, higher oil prices!”

STE­FAN WERMUTH / BLOOMBERG

Khalid Al-Falih (cen­ter), Saudi Ara­bia’s en­ergy and in­dus­try minister, speaks with re­porters Thurs­day be­fore OPEC’s de­ci­sion to cut pro­duc­tion by 800,000 bar­rels a day.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.