OPEC nations, Russia look to cut oil output to lift prices

A meeting of the Organization of the Petroleum Exporting Countries (OPEC) has ended with an apparent informal agreement to cut oil production to help boost prices amid rising reserves and a slowing global economy, but no announcement was made pending a meeting with other countries, including Russian Federation, set for December 6. The move is created to combat stagnant global economic growth blamed on the U.S.

The group of more than 20 producers agreed to an extra 500,000 barrels per day (bpd) in cuts for the first quarter of 2020, sources told Reuters, taking the total to 1.7 million bpd, or 1.7% of global demand. A cut of 1.7 million bpd would amount to 1.7% of global supply.

Saudi Energy Minister Prince Abdulaziz bin Salman said the Kingdom, the world's largest oil exporter and OPEC's defacto leader, would continue a voluntary cut of 400,000 bpd.

"We expect a constructive outcome to today's meeting in terms of a prolongation of the deal, but are not yet convinced that a strong bullish surprise with a sizeable adjustment to the target level will really transpire", Vienna-based consultancy JBC Energy said in a note.

The group's goal is to to support the price of fuel and energy around the world.

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Under their current pact, due to expire in March 2020, 11 of Opec's 14 member states have agreed to cut about 800,000 bpd of output, with Iran, Libya and Venezuela exempted from participating.

Oil prices surged following the announcement, with USA benchmark WTI and its European counterpart Brent both almost two per cent higher shortly after 1500 GMT.

Venezuelan Oil Minister Manuel Quevedo, the former President of OPEC Conference in 2019 was replaced with Algerian Energy Minister Mohamed Arkab for 2020.

Higher oil prices are also supporting the initial public offering (IPO) of Saudi Arabia's state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range. Then the bigger struggle of how these cuts will be allocated between members needs to be tackled.

The decision, unanimously approved by the seventh ministerial meeting of OPEC and non-OPEC partners, takes effect as of January, he pointed out. A sticking point in the talks had been how to split the cuts between producers. Russia, which has complied with its production quota for just three months of this year, had its proposal to exclude a very light oil called condensate approved on Thursday, potentially giving it space to keep pumping above its target.

  • Darren Santiago