Oil pro­duc­ers join forces, cut pro­duc­tion again

The State - - Business - BY AN­THONY MILLS, KIYOKO MET­ZLER AND DAVID RIS­ING

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 Saudi Ara­bia and Iraq said it would cut 800,000 bar- rels 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 reg- ular 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 predic- tions. Fol­low­ing the an­nounce­ment, Brent crude, the in­ter­na­tional stan­dard, was up $2.79 a bar­rel, or 4.7 per­cent, at $62.85. Bench­mark New York crude was $2.11, or 4.1 per­cent, higher at $53.60 a bar­rel.

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.

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