Opec Oil Output Deal Boosts Prices
The producers' cartel Opec and its allies led by Russia have agreed to cut oil production by 1.2mn b/d from January 2019, relative to a higher October base-line, the monitoring committee told a press conference December 7. Energy ministers from Opec members had been meeting in Vienna to hammer out a deal. World crude prices have lost about a quarter of their value since October.
Opec cuts will add up to 800,000 barrels/day, without cuts from Iran and Libya, while non-Opec producers will cut output by half that, with Russis reportedly ready to account for half of that, or 200,000 b/d.
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According to Opec’s secondary statistics, the members produced 32.9mn barrels/day (b/d) in October, about 127,000 b/d more than September.
The Dated Brent crude benchmark rose 4.6% to $62.82/b, while the US benchmark WTI rose 4.14% to $53.62/b at time of press (17:00 GMT). In early October Brent reached a four-year high, above $85/b.
US president Donald Trump has repeatedly asked the “Opec monopoly” to allow prices to decline or risk facing US action. This could include a Nopec Act, which would open the group up to anti-trust lawsuits. This has been threatened by previous presidents but never materialised.
Saudi Arabian oil minister said during the joint press conference that the cut deal would last six months and then Opec and allies can evaluate markets again. He added that the goal of the deal is to keep markets supplied.
Commenting on the deal, analysts at Wood MacKenzie said the cut would tighten the oil market by the third quarter of 2019 and cause prices to rise back above $70/b for Brent. “It would help producers contend with the strength of US supply growth in 2019 when we expect a year-on-year increase of 2.4mn b/d in non-Opec production as US supply continues to gain sharply."