VIENNA (Reuters) – OPEC and its Russian-led allies agreed on Friday to cut oil production more than expected, despite pressure from US President Donald Trump to cut oil prices.
Russian Energy Minister Alexander Novak and UAE's Minister of Oil, Suhail Mohammed Al Mazrouei, will attend the OPEC meeting at the FAO headquarters in Vienna, Austria on Friday. Photo by Leonard Fugger
Iraq's oil minister Thamer Ghadhban said after OPEC concluded two days of talks in Vienna that the group would cut its production of 0.8 million barrels a day (bpd) from January, while allies did not OPEC would have contributed further to 0.4 million barrels per day.
Oil prices rose by almost 5% above $ 63 per barrel of 1500 GMT, as the total cut of 1.2 million barrels per day exceeds the minimum of one million barrels per day expected by the market.
Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries (OPEC), has addressed Trump's requests to help the global economy by refraining from cutting supplies.
The cut in production will also support Iran by increasing oil prices, among Washington's attempts to put pressure on the third producer of OPEC.
"We will never face geopolitical issues at OPEC," said UAE Minister of Energy, Suhail bin Mohammed al-Mazroui, at a news conference.
Russian Energy Minister Alexander Novak praised the ability of his Saudi counterpart Khaled al-Faleh to "find a solution in the most difficult situation", adding that Russia would participate in the reduction.
The OPEC agreement remained in play for two days, initially for fear that Russia would cut too little, and then for concerns that Iran, whose crude oil exports had been reduced by US sanctions, would not get an exception and could derail the deal.
But after hours of talks, Iran gave the green light to OPEC and Russia expressed its willingness to cut further.
A meeting of OPEC and non-OPEC producers quickly approved the agreement, according to OPEC exporters.
Ghadban said the cut would continue for six months from January and October production would be its reference base. OPEC and Russia produced less in October than in November. But OPEC can not reveal production quotas for each country, sources said.
"OPEC cuts are not clear," said Bob McNally, president of the Rapiden Energy Group, headquartered in the United States, which risks cutting the key figure by 1.2 million barrels a day.
"Today's news headlines will not excite President Trump, but the magnitude of his reaction will depend mainly on the fact that this will drive crude oil prices up in the coming days and weeks."
Washington poured oil into the fire when the US special envoy to Iran, Brian Hawk, met Fahil in Vienna this week in unprecedented development ahead of an OPEC meeting.
Initially, Saudi Arabia denied the discussions between Hawk and al-Faleh, but later confirmed them.
"The US political pressure is clearly dominant at this OPEC meeting, limiting the scale of Saudi measures to rebalance the market," said Gary Ross, managing director of Black Gold Investors and veteran of Opec.
Crude oil prices have fallen by almost a third since October, while Saudi Arabia, Russia and the United Arab Emirates have increased production to offset a decline in Iranian exports.
OPEC and Russia have started discussing production cuts, but Russia has long resisted any deep cuts.
Novak met Russian President Vladimir Putin in St. Petersburg on Thursday and returned to the Austrian capital on Thursday.
Russia is ready to contribute around 200,000 barrels a day (bpd) – more than the initial figure of 150,000 barrels a day, said a source from the Russian lightning ministry. A source from OPEC later said that Russia had accepted a cut of 230,000 barrels a day.
In recent years Russia, Saudi Arabia and the United States have been at the forefront of crude oil producers. The United States does not participate in restrictive production initiatives due to anti-monopoly legislation and the fragmentation of its oil industry.
On Thursday, figures for the US government showed that the United States had for the first time become net exporters of crude oil and refined products, highlighting the magnitude of output that changed the equation 39; offer on world markets.
Posted by أحمد غدار and Alex Lawler – Prepared by Ahmed Elhamy for publication in Arabic