Oil producers from around the world join forces and cut production again

Oil producers have been under pressure to reduce production following a sharp fall in oil prices

Oil producers from around the world join forces and cut production again

Oil prices spiked sharply higher Friday as major oil producers, including the OPEC cartel, agreed to cut global oil production by 1.2 million barrels a day to reduce oversupply.

Following two days of meetings, the Organization of the Petroleum Exporting Countries that includes the likes of Saudi Arabia and Iraq said they would cut 800,000 barrels per day for six months from January, though some countries such as Iran, which is facing wide-ranging sanctions from the United States, have been given an exemption.

The balance will come from Russia and other non-OPEC countries. The United States, one of the world’s biggest producers, is not part of the deal.

“This is a major step forward,” said United Arab Emirates’ Energy Minister Suhail Mohamed al-Mazrouei, who chairs the regular meetings in Vienna in his capacity as President of the OPEC Conference.

Oil producers have been under pressure to reduce production following a sharp fall in oil prices over the past couple of months. The price of oil has fallen about 25 per cent recently because major producers — including the U.S. — are pumping oil at high rates.

The reduction has certainly met with the response hoped for by ministers as it was at the upper end of most predictions. Following the announcement, Brent crude, the international standard, was up $2.79 a barrel, or 4.7 per cent, at $62.85. Benchmark New York crude was $2.11, or 4.1 per cent, higher at $53.60 a barrel.

Ann-Louise Hittle, a vice-president at oil industry expert Wood Mackenzie, said the production cut “would tighten” the oil market by the third quarter next year and help lift Brent prices back above $70 per barrel.

“For most nations, self-interest ultimately prevails,” she said. “Saudi Arabia has a long-term goal of managing the oil market to avoid the sharp falls and spikes which hurt demand and the ability of the industry to develop supply. On top of this, Saudi Arabia also needs higher oil revenues to fund domestic Saudi spending.”

Russian Energy Minister Alexander Novak called the negotiations with the OPEC nations “fairly challenging” but said the decision “should help the market reach a balanced state.”

“I think this is a strong signal to anybody who has doubted it that our co-operation is continuing and we can react to any challenge the market throws at us,” he said in Russian through a translator.

OPEC’s reliance on non-members like Russia highlights the cartel’s waning influence in oil markets, which it had dominated for decades. The OPEC-Russia alliance was made necessary in 2016 to compete with the United States’ vastly increased production of oil in recent years. By some estimates, the U.S. this year became the world’s top crude producer.

The cut is unlikely to be greeted warmly by U.S. President Donald Trump, who has been pressuring the cartel publicly to maintain production. On Wednesday, he tweeted: “Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!”

One stumbling block to an agreement had been Iran, Saudi Arabia’s regional rival and fellow OPEC member, which had been arguing for an exemption to any cuts because its crude exports are already being pinched already by U.S. sanctions.

Al-Mazrouei said that in the end Iran had been given an exemption, as well as Venezuela and Libya.

That “means that the percentage we will contribute among us is going to be a bit higher,” he said.

“We within OPEC are committed to distribute the 800 (thousand bpd) among us and deliver on it.”

Anthony Mills, Kiyoko Metzler And David Rising, The Associated Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

File photo
City of Wetaskiwin awarded $5.1 million grant for additional RCMP officers

10 Additional RCMP officers to serve the City of Wetaskiwin as a result of the grant.

Image curtesy of MetroCreativeConnection
Grass fire season ablaze this spring in the County of Wetaskiwin

Fire Departments across Wetaskiwin County have been feeling the effects of a dry spring.

Facebook/ Millet Fire Department
Millet Fire Department monitoring bale fire after morning of fighting flames

Smoke and flames clearly visible from the QEII and Hwy 616 as the MFD battled the blaze this morning

Conservative leader Erin O’Toole holds a press conference on Parliament Hill in Ottawa on Tuesday, April 6, 2020. Top Tory leaders of past and present will speak with supporters today about what a conservative economic recovery from COVID-19 could look like. THE CANADIAN PRESS/Sean Kilpatrick
O’Toole to vote against Conservative MP’s private bill on ‘sex-selective abortion’

Erin O’Toole said he supports a woman’s right to choose and will personally vote against the private member’s bill

Alberta Premier Jason Kenney updates media on measures taken to help with COVID-19, in Edmonton on Friday, March 20, 2020. Alberta is set to join three other provinces in exploring the feasibility of small modular reactors as a clean energy option. THE CANADIAN PRESS/Jason Franson
Four provinces to sign memorandum of understanding to explore small nuclear reactors

Alberta government said in August that it would enter into the agreement to help diversify its energy sector

Sharis Carr, a nurse at the Aaron E. Henry Community Health Service Center in Clarksdale, Miss., holds a box containing doses of the Johnson & Johnson COVID-19 vaccine Wednesday, April 7, 2021. The U.S. is recommending a “pause” in using the single-dose Johnson & Johnson COVID-19 vaccine to investigate reports of potentially dangerous blood clots. (AP Photo/Rogelio V. Solis)
EXPLAINER: What’s known about COVID vaccines and rare clots

These are not typical blood clots – they’re weird in two ways

Titanic was the largest and most luxurious ship in the world. Photo provided and colourized by Jiri Ferdinand.
QUIZ: How much do you know about the world’s most famous shipwreck?

Titanic sank 109 years ago today, after hitting an iceberg

A health-care worker holds up a vial of the AstraZeneca Covishield vaccine at a COVID-19 vaccination clinic in Montreal, Thursday, March 18, 2021. THE CANADIAN PRESS/Paul Chiasson
PHAC receives first report of blood clot linked to AstraZeneca

The federal agency says the person is now recovering at home

A real estate sign is pictured in Vancouver, B.C. THE CANADIAN PRESS Jonathan Hayward
1 in 3 young Canadians have given up on owning a home: poll

Data released Monday says 36% of adults younger than 40 have given up on home ownership entirely

Whistle Stop Cafe owner Christopher Scott and his sister Melodie pose for a photo at the Mirror restaurant. The central Alberta restaurant has received a closure notice from Alberta Health Services for defying latest government restrictions that kicked in Friday afternoon. (File photo by Advocate staff)
Alberta Health Services delivers ‘closure order’ to Mirror restaurant

Whistle Stop Cafe has remained defiant after the government’s move back to Step 1

Dr. E. Kwok administers a COVID-19 vaccine to a recipient at a vaccination clinic run by Vancouver Coastal Health, in Richmond, B.C., Saturday, April 10, 2021. THE CANADIAN PRESS/Jonathan Hayward
Most Canadians plan to get COVID-19 vaccine, but safety fears drive hesitancy: poll

This comes as confidence in governments is plummeting in provinces being hit hardest by the pandemic

Marathon of Hope runner Terry Fox is shown in a 1981. (THE CANADIAN PRESS/CP)
Terry Fox’s legacy of resilience resonates during COVID-19 crisis, says brother

Fred Fox said his brother’s legacy of resilience has taken on renewed resonance as COVID-19 rages on

Most Read