The Organisation of Petroleum Exporting Countries (OPEC) on Thursday reached a deal to cut oil output.
Advertisement
The fact any agreement on a reduction was possible was down to a change of heart by the Saudis who have been opposing any cut in output as they pursued a policy that they hoped would see cheap Opec oil undermine exploration efforts in non-Opec countries, particularly the US.
The Russian energy minister said Russia was ready to consider proposals from OPEC for joint action on the oil market and would hold consultations with the group in October and November.
During an informal meeting in Algiers on September 28, OPEC member country ministers were able to agree on an oil production cap for the first time since 2008.
Oil prices jumped up after the announcement – the first time in five months. A more definitive policy, including production caps for individual members, will be discussed and possibly ratified at OPEC’s next meeting on November 30 in Vienna.
Brent oil prices spiked 6 per cent on Wednesday after the OPEC deal. This meeting was the first official meeting of OPEC to be organized by the new Secretary General since his official resumption on 1st August, 2016, he added.
The kind of celebration that would come with an OPEC production agreement, bringing both more stable and higher prices, quickly dissolved when traders took a closer look at the agreement reached in Algeria among OPEC members.
This post was syndicated from The Nation Nigeria.
Brent for November settlement, which expires Friday, climbed 55 cents, or 1.1 per cent, to $US49.24 a barrel on the London-based ICE Futures Europe exchange. “That’s why there is some skepticism”, says Jim Burkhard, head of oil market research for IHS Energy. Saudi Arabia typically reduces its production as the summer ends and autumn starts.
U.S. West Texas Intermediate crude rose 78 cents, or 1.7 percent, to settle at $47.83 after a one-month high at $48.32. The US oil drilling rig count has risen in 12 of the 13 past weeks.
“There are concerns about the execution of OPEC’s new production targets”, said IG Markets analyst Chris Weston.
Prices pared gains as US equities dropped after a Bloomberg News report that signaled growing concern among some Deutsche Bank AG clients roiled the global financial sector.
The US said it had little faith in this week’s deal leading to higher prices in the long term.
Advertisement
The Saudi and Iranian economies depend heavily on oil but in a post-sanctions environment, Iran is suffering less pressure from the halving in crude prices since 2014 and its economy could expand by nearly 4 percent this year, according to the International Monetary Fund.
