But despite Saudi Arabia’s reluctance, it agreed to shoulder the lion’s share of the production cuts, trimming its output by 486,000 barrels a day to more than 10 million barrels a day.
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Crude oil prices shot up almost 10 percent in the wake of the agreement and the enthusiasm spilled over into Thursday trading. Prices have wavered between about $40 and $54 since the spring.
A weekly government report on US crude oil stockpiles had little sway in the market, which remained focused on the OPEC deal.
A global supply glut and hopes of an OPEC deal saw oil prices rally and sink over the summer.
But OPEC now has a hard needle to thread. Brent crude gained 8 percent on the European markets, trading at US$50.12 per barrel.
The U.S. Energy Department predicts that heating oil costs will rise about one-third this winter, but that prediction was issued more than a month ago and was based heavily on forecasts of much colder temperatures in the Northeast. The specialty firms that do the fracking have raised prices because “they are booked out through June or July”.
Currie said this deal shows that OPEC is desperate to bring the price of oil higher.
Speaking on the sidelines, Nigeria’s Minister of State for Petroleum Resources, Dr. Ibe Kachikwu said OPEC members are “largely convergent” on the need for a production cut.
Libya and Nigeria were granted exemptions because they have experienced significant supply outages due to internal conflicts. But RBC Capital Markets said adherence may not matter so much this time for a simple reason: OPEC members are near full-tilt, and they don’t have much more capacity to pump. Russian Federation added to the surprise by saying it too would reduce current output of 11.2 million barrels a day – a reversal for Novak who had for months expressed Russia’s preference for freezing at that level. Rising prices can provide a lift to the troubled economies of oil-dependent nations such as Nigeria and Venezuela, and bolster the fortunes of smaller American energy producers that have been shaken by the weakness. Effective Jan. 1, the group will produce 32.5 million barrels per day. The deal was expected to be finalized this week and include participation by non-OPEC producers such as Russia, Azerbaijan and Kazakhstan. Iran’s quota was set at 3.797 million barrels a day, down 90,000 barrels from October.
Iraq will reduce output by 200,000 bpd to 4.351 million bpd beginning in January, while the United Arab Emirates, Kuwait, and Qatar will cut by a combined total of about 300,000 barrels per day.
European stocks also advanced on a jump in oil companies.
There are some reports the starting point for Russia’s planned production cut will be from its intended levels for 2017.
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A compromise agreement could see Tehran increasing output, but not to pre-sanctions level of around 4 million barrels a day, as the Iranians originally demanded.
