The Organization Of Petroleum Exporting Countries, OPEC member countries has unanimously reached an agreement to slash down oil output to 32.5 million barrels per day (bpd) from 33.24 million bpd.
This is happening for the first time in eight years amidst the high rate of oil prices all over the world.
Saudi Arabia, a strong member of the cartel, relaxed its stance on arch-rival Iran amid
mounting pressure from low oil prices.
mounting pressure from low oil prices.
Two sources in the OPEC said the group would reduce output
to 32.5 million barrels per day from current production of 33.24 million bpd.
to 32.5 million barrels per day from current production of 33.24 million bpd.
“OPEC made an exceptional decision today … After two and a
half years, OPEC reached consensus to manage the market,” Iranian Oil Minister
Bijan Zanganeh was quoted by Iran’s SHANA news agency as saying, without giving
details.
half years, OPEC reached consensus to manage the market,” Iranian Oil Minister
Bijan Zanganeh was quoted by Iran’s SHANA news agency as saying, without giving
details.
OPEC’s informal meeting in Algeria was still continuing
after five hours.
after five hours.
How much each country will produce is to be decided at the
next formal meeting of OPEC in November, when an invitation to join cuts could
also be extended to non-OPEC countries such as Russia, sources said.
next formal meeting of OPEC in November, when an invitation to join cuts could
also be extended to non-OPEC countries such as Russia, sources said.
Meanwhile, oil prices yesterday, rose by more than 5 per
cent to trade above $48 per barrel as many traders said they were impressed
OPEC had managed to reach a deal but others said they wanted to see the
details.
cent to trade above $48 per barrel as many traders said they were impressed
OPEC had managed to reach a deal but others said they wanted to see the
details.
“This is the first OPEC deal in eight years.
“The cartel
proved that it still matters even in the age of shale! This is the end of the
‘production war’ and OPEC claims victory,” said Phil Flynn, senior energy
analyst at Price Futures Group.
proved that it still matters even in the age of shale! This is the end of the
‘production war’ and OPEC claims victory,” said Phil Flynn, senior energy
analyst at Price Futures Group.
Jeff Quigley, director of energy markets at Houston-based
Stratas Advisors, said the market had yet to discover who would produce what:
“I want to hear from the mouth of the Iranian oil minister that he’s not going
to go back to pre-sanction levels. For the Saudis, it just goes against the
conventional wisdom of what they’ve been saying.”
Stratas Advisors, said the market had yet to discover who would produce what:
“I want to hear from the mouth of the Iranian oil minister that he’s not going
to go back to pre-sanction levels. For the Saudis, it just goes against the
conventional wisdom of what they’ve been saying.”
Saudi Energy Minister Khalid al-Falih ,had said on Tuesday
that Iran, Nigeria and Libya would be allowed to produce “at maximum levels
that make sense” as part of any output limits which could be set as early as
the next OPEC meeting in November.
that Iran, Nigeria and Libya would be allowed to produce “at maximum levels
that make sense” as part of any output limits which could be set as early as
the next OPEC meeting in November.
That represents a strategy shift for Riyadh, which has said
it would reduce output to ease a global glut only if every other OPEC and
non-OPEC producer followed suit. Iran has argued it should be exempt from such
limits as its production recovers after the lifting of EU sanctions earlier
this year.
it would reduce output to ease a global glut only if every other OPEC and
non-OPEC producer followed suit. Iran has argued it should be exempt from such
limits as its production recovers after the lifting of EU sanctions earlier
this year.
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 almost 4 percent
this year, according to the International Monetary Fund.
a post-sanctions environment, Iran is suffering less pressure from the halving
in crude prices since 2014 and its economy could expand by almost 4 percent
this year, according to the International Monetary Fund.
Riyadh, on the other hand, faces a second year of budget
deficits after a record gap of $98 billion last year, a stagnating economy and
is being forced to cut the salaries of government employees.
deficits after a record gap of $98 billion last year, a stagnating economy and
is being forced to cut the salaries of government employees.
Several attempts in the past to cut oil output has met stiff
opposition from OPEC member countries, especially from Saudi Arabia and Iran.
opposition from OPEC member countries, especially from Saudi Arabia and Iran.
Iran just recently returned to OPEC after several years of
sanction on it by the United States.
sanction on it by the United States.
