OPEC agrees to cut in oil production

Dwayne Harmon
December 13, 2018

U.S. Sen. Lindsey Graham, R-S.C., said he wanted to "sanction the hell out of" the Saudi government.

Crude inventories fell 7.3 million barrels last week, the first drawdown since September, as net crude imports hit a record low of 4 million bpd, the US Energy Information Administration said on Thursday.

The oil market reacted negatively to OPEC's setback, with Brent crude sliding 2.4 percent to $60.06 a barrel in London on Thursday. Prices on Friday settled below the session's highs. Russia, and other producers outside the cartel, promised to slash an additional 400,000 barrels per day.

"We don't need permission from anyone to cut", he said. OPEC members include Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.

Russian Energy Minister Alexander Novak praised the ability of his Saudi counterpart Khalid al-Falih "to find a solution in the most hard situation", indicating Russia was on board.

The Organization of the Petroleum Exporting Countries (OPEC) is among the world's most powerful cartels. If there is no agreement, the timeline for a deal will be pushed to the first quarter of 2019, ' Energy Aspects said in a note. "The market won't care if tomorrow they manage a sizable cut with proper metrics, but that's still a big if".

Russian Federation gave a commitment to reduce output by 228,000 bpd from October levels of 11.4 million bpd, though it said the cuts would be gradual and take place over several months. That was in line with the Saudi minister's preference for a moderate reduction that wouldn't "shock the market".

Economic Affairs Minister Datuk Seri Azmin Ali said Malaysia's reduced output was in line with its commitment to worldwide cooperation to face economic challenges posed by the global oil market. World prices could affect the sale of the securities in Austria and the United States, the increase in commercial oil reserves in the USA and falling global stock markets. The one in 1979 caused oil prices to double.

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The size of Russia's contribution to any OPEC+ curbs has remained undefined through this week's talks in Vienna. Analysts had forecast a decline of 2.39 million barrels. Those countries, along with Nigeria, were opposed to participating in a supply reduction, the delegate said.

Saudi Energy Minister Khalid al-Falih said he was not confident a deal could be reached.

The cut will be based on October output and will be subject to review in April, said a spokesman for the Vienna meeting, Tafal al-Nasr.

The slight recovery came after crude slumped by nearly 3 per cent the previous day, with the Opec ending a meeting at its headquarters in Vienna, Austria, on Thursday without announcing a decision to cut crude supply.

On Wednesday, the USA leader tweeted he hoped OPEC would "be keeping oil flows as is, not restricted".

But it was clear the Saudis did want cuts, though Al-Falih warned on Tuesday that it was "premature" to talk about them.

But after hours of talks, Iran gave OPEC the green light and Russian Federation said it was ready to cut more.

The joint output reduction is seen as a deeper cut than expected, as the US wants OPEC to keep a relatively lower oil price.

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