OPEC agrees to first output cut deal in eight years

Published December 1st, 2016 - 05:04 GMT
The deal promises to revive the tattered finances of countries from Venezuela to Libya and restore flagging confidence in the producer bloc that controls 40 per cent of the world’s oil. (File photo)
The deal promises to revive the tattered finances of countries from Venezuela to Libya and restore flagging confidence in the producer bloc that controls 40 per cent of the world’s oil. (File photo)

The Organization of Petroleum Exporting Countries has reached a deal to cut production by 1.2 million barrels per day (bpd) - its first output cut since 2008 - to clear a record global crude glut, said a report, citing sources.

Opec will reduce production by 1.2 million bpd to 32.5 million a day, two delegates said on Wednesday during a ministerial meeting in Vienna, asking not to be identified as the decision isn’t yet public, reported Bloomberg.

On hearing the news, oil prices jumped as much as 8 per cent to $50.07 a barrel in London at 1:37 p.m. local time posting a five-week high jump.

After weeks of tense negotiations, the Opec’s three biggest producers - Saudi Arabia, Iraq and Iran - resolved differences over sharing the burden of cuts, stated the report.

Notably, it appears the Saudis accepted that Iran, as a special case, can raise production to about 3.9 million bpd, the report said, citing sources.

The agreement is also likely to include an additional reduction of about 600,000 barrels a day by non-Opec countries, it adeed.

The deal promises to revive the tattered finances of countries from Venezuela to Libya and restore flagging confidence in the producer bloc that controls 40 per cent of the world’s oil, said the Bloomberg report.

But the consequences will reverberate far beyond Opec, giving a boost to US shale drillers crippled by a two-year price rout and oil giants such as Royal Dutch Shell, which have cut spending to the bone to weather the prolonged downturn, said the report.

Morgan Stanley said an Opec agreement could boost crude prices by $5 or more. While the deal is unlikely to be enough to wipe out the crude glut entirely - Opec’s own estimates show it needs to pump just 31.9 million barrels a day from January to June to balance supply and demand -- it clears the way for participation by non-Opec suppliers, chiefly Russia, it added.


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