OPEC and Non-OPEC Producers Agree to Cut Crude Oil Production
Saturday, OPEC and non-OPEC producers reached their first deal since Y 2001 to curtail oil output jointly and ease a global glut after more than 2 years of low prices that stretched many budgets and triggered unrest in some countries.
With the deal signed after almost a year of arguing within the Organization of the Petroleum Exporting Countries (OPEC) and mistrust in the willingness of non-OPEC Russia to join, the market’s focus will now switch to compliance with the agreement.
OPEC has a long history of cheating on output quotas.
The fact that Nigeria and Libya were exempt from the deal due to production-denting civil strife will further pressure OPEC leader Saudi Arabia to shoulder the bulk of supply reductions.
Russia 15 years ago failed to deliver on promises to cut in tandem with OPEC is now expected to perform real output reductions . But energy analysts question whether many other non-OPEC producers are attempting to present a Natural decline in output as their contribution to the deal.
“This agreement cements and prepares us for long-term cooperation,” Saudi Energy Minister Khalid al-Falih told reporters after the meeting, calling the deal “historic”.
Russian Energy Minister Alexander Novak told the same news conference: “Today’s deal will speed up the oil market stabilization, reduce volatility, attract new investments.”
Last week, OPEC agreed to cut output by 1.2-M BPD from 1 January 2017, with top exporter Saudi Arabia cutting as much as 486,000 BPD.
Saturday, producers from outside the 13-country group agreed to reduce output by 558,000 BPD, short of the initial target of 600,000 BPD but still the largest contribution by non-OPEC ever. Of that, Russia will cut 300,000 BPD.
Crude Oil prices have more than halved in the past 2 years after Saudi Arabia raised output steeply in an attempt to drive higher-cost producers such as US shale oil firms out of the market.
The plunge in oil to below 50 bbl and sometimes even below 30 from as high as 115 in mid-2014 has helped reduce growth in US shale oiloutput.
But it also hit the revenues of Oil-dependent economies including Saudi Arabia and Russia, prompting the two largest exporters of crude to start their 1st Crude Oil production cooperation talks in 15 years.
Apart from Russia, the talks Saturday were attended by or had comments or commitments sent from non-OPEC members Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan.
OPEC and the non-OPEC countries at the meeting were responsible for 55% of global output. Their joint reduction of around 1.8-M BPD would account to about 2% of global Crude Oil supply.
|HeffX-LTN Analysis for OIL:||Overall||Short||Intermediate||Long|
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Have a terrific weekend.