Opec, allies agree to additional 500,000 bpd oil output cuts
Member countries pledge to protect market stability; Saudi Arabia to continue additional voluntary cuts
The Opec group of oil producing countries and their allies - including Russia - agreed on Friday to a production cut of 500,000 bpd in addition to their current agreement.
Ministers gathered at the Opec headquarters in Vienna "decided for an additional adjustment of 500 [thousand bpd]", effective as of January 1, 2020, according to a statement issued after the meeting.
This would bring production 1.7 million bpd below October 2018 levels.
However, the group said that "in addition, several participating countries, mainly Saudi Arabia, will continue their additional voluntary contributions", meaning the overall production cut would be 2.1 million bpd.
The statement said that Opec and its partners in the so-called Opec+ grouping would convene for a special meeting on March 6.
"We have decided to reduce production by 500,000 barrels a day through the first quarter of next year," said Russian energy minister Alexander Novak.
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.
In a Press release, Opec said the meeting noted that a number of critical uncertainties need to be monitored, including trade-related negotiations, macroeconomic developments and other factors.
"The conference also observed the potential consequences of these developments on global inventory levels, as well as overall market and industry sentiment," it added.
"Member countries reaffirmed their continued focus on fundamentals for a stable and balanced oil market, in the interests of producers, consumers and the global economy. The conference emphasised the ongoing inclusive coordination with consuming countries, and the consultations undertaken before reaching decisions. Member countries are resolute and committed to being dependable and reliable suppliers of crude and products to global markets."
Oil prices rose sharply on Friday after the decision.
Brent futures were up around 2 per cent to $64.59 by 1456GMT and are on track to rise nearly 4 per cent on the week.
West Texas Intermediate oil futures rose around 2 per cent to $59.49 a barrel. They are set to rise nearly 8 per cent on the week.
"The Saudi goal was not necessarily to push oil prices significantly higher, but rather - fresh on the heels of the Aramco IPO - to put a firm floor under them during the first quarter to temper any seasonal weakness," said Amrita Sen, co-founder of Energy Aspects.
Opec and allied producers pump more than 40 per cent of the world's oil. Under the new deal, Opec will shoulder 372,000 bpd in fresh cuts and non-Opec producers an extra 131,000 bpd, a source told Reuters.
"Best outcome you could have expected. Puts floor under prices at $60 Brent but [we're] still likely in $60-65 Brent market until the global economy improves and then we could see $65 to $70 Brent in Q2," said Gary Ross, founder of Black Gold Investors.
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