Wednesday, OPEC agreed to token Crude Oil output cuts in the 1st such deal since Y 2008, with leader Saudi Arabia softening its stance Vs Iran on mounting pressure from low Crude Oil prices.
“OPEC made an exceptional decision today … After two and a half years, OPEC reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh, who had repeatedly clashed with Saudi Arabia during previous meetings.
He and other ministers said the Organization of the Petroleum Exporting Countries (OPEC) would maintain output in range of 32.5-33.0-M BPD.
OPEC estimates its current output at 33.24-M BPD.
“We have decided to decrease the production around 700,000 bpd,” Mr. Zanganeh said.
The move effectively re-establishes OPEC production ceilings abandoned a year ago.
How much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia.
Crude Oil prices jumped more than 5% to trade above $8 bbl as of 2015 GMT. Many traders said they were impressed OPEC had managed to reach a compromise after years of wrangling but others said they wanted to see the details.
Saudi Energy Minister Khalid al-Falih said Tuesday that Iran, Nigeria and Libya would be allowed to produce “at maximum levels that make sense” as part of any output limits.
The Saudi and Iranian economies depend heavily on Crude Oil but in a post-sanctions environment, Iran is suffering less pressure from the halving in Crude Oil prices since Y 2014 and its economy could expand by almost 4% this year, according to the International Monetary Fund (IMF).
Saudi, on the other hand, faces a 2nd year of budget deficits after a record gap of $98-B last year, seeing a stagnating economy.
Saudi Arabia is by far the largest OPEC producer with output of more than 10.7-M BPD, on par with Russia and the United States. Together, the 3 largest global producers extract a 33% of the world’s Crude Oil.
Sources said Saudi Arabia offered to reduce its output from Summer peaks of 10.7-M BPS to around 10.2-M if Iran agreed to freeze production at around current levels of 3.6-3.7-M BPD.
Saudi has raised production in recent years to compete for market share while Iran’s output was limited by sanctions.
Minister Zanganeh has said Iran wanted an output cap of close to 4-M BPD, Saudi output drops in Winter when it needs less fuel than during Summer.
|HeffX-LTN Analysis for OIL:||Overall||Short||Intermediate||Long|
|Neutral (0.02)||Neutral (-0.10)||Bullish (0.27)||Neutral (-0.10)|
|HeffX-LTN Analysis for USO:||Overall||Short||Intermediate||Long|
|Neutral (0.14)||Neutral (0.01)||Bullish (0.25)||Neutral (0.17)|
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