Oil producers from around the world join forces and cut production again

Oil producers have been under pressure to reduce production following a sharp fall in oil prices

Oil producers from around the world join forces and cut production again

Oil prices spiked sharply higher Friday as major oil producers, including the OPEC cartel, agreed to cut global oil production by 1.2 million barrels a day to reduce oversupply.

Following two days of meetings, the Organization of the Petroleum Exporting Countries that includes the likes of Saudi Arabia and Iraq said they would cut 800,000 barrels per day for six months from January, though some countries such as Iran, which is facing wide-ranging sanctions from the United States, have been given an exemption.

The balance will come from Russia and other non-OPEC countries. The United States, one of the world’s biggest producers, is not part of the deal.

“This is a major step forward,” said United Arab Emirates’ Energy Minister Suhail Mohamed al-Mazrouei, who chairs the regular meetings in Vienna in his capacity as President of the OPEC Conference.

Oil producers have been under pressure to reduce production following a sharp fall in oil prices over the past couple of months. The price of oil has fallen about 25 per cent recently because major producers — including the U.S. — are pumping oil at high rates.

The reduction has certainly met with the response hoped for by ministers as it was at the upper end of most predictions. Following the announcement, Brent crude, the international standard, was up $2.79 a barrel, or 4.7 per cent, at $62.85. Benchmark New York crude was $2.11, or 4.1 per cent, higher at $53.60 a barrel.

Ann-Louise Hittle, a vice-president at oil industry expert Wood Mackenzie, said the production cut “would tighten” the oil market by the third quarter next year and help lift Brent prices back above $70 per barrel.

“For most nations, self-interest ultimately prevails,” she said. “Saudi Arabia has a long-term goal of managing the oil market to avoid the sharp falls and spikes which hurt demand and the ability of the industry to develop supply. On top of this, Saudi Arabia also needs higher oil revenues to fund domestic Saudi spending.”

Russian Energy Minister Alexander Novak called the negotiations with the OPEC nations “fairly challenging” but said the decision “should help the market reach a balanced state.”

“I think this is a strong signal to anybody who has doubted it that our co-operation is continuing and we can react to any challenge the market throws at us,” he said in Russian through a translator.

OPEC’s reliance on non-members like Russia highlights the cartel’s waning influence in oil markets, which it had dominated for decades. The OPEC-Russia alliance was made necessary in 2016 to compete with the United States’ vastly increased production of oil in recent years. By some estimates, the U.S. this year became the world’s top crude producer.

The cut is unlikely to be greeted warmly by U.S. President Donald Trump, who has been pressuring the cartel publicly to maintain production. On Wednesday, he tweeted: “Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!”

One stumbling block to an agreement had been Iran, Saudi Arabia’s regional rival and fellow OPEC member, which had been arguing for an exemption to any cuts because its crude exports are already being pinched already by U.S. sanctions.

Al-Mazrouei said that in the end Iran had been given an exemption, as well as Venezuela and Libya.

That “means that the percentage we will contribute among us is going to be a bit higher,” he said.

“We within OPEC are committed to distribute the 800 (thousand bpd) among us and deliver on it.”

Anthony Mills, Kiyoko Metzler And David Rising, The Associated Press

Like us on Facebook and follow us on Twitter.

Just Posted

Michelle Jacobs receives her first dose of the COVID-19 vaccine at the Coast Capri Hotel on April 28, 2021. The pop-up clinic was hosted by the First Nations Health Authority. (Aaron Hemens/Capital News)
126 new cases of COVID-19 in Interior Health over the weekend

There are 22 individuals hospitalized due to the virus, and 13 in intensive care

Vernon local Ryan Lazar – who specializes in 2D background design and 3D animation – is ready to start his career after a tough yet rewarding two years of studies. (Contributed)
Okanagan College students get animated at graduation

‘The pandemic has resulted in more video consumption and the animation industry is so hot right now because of it’

There were questions raised as to whether or not this structure actually cost less than $100,000. Scott Robertson, owner of Absolute Contracting and partial owner for Arrowtec, said the building is meant to be
temporary as two or three years down the road, his company’s intent is develop houses on the property in line with the land use designated to the property in the Official Community Plan, which is T4–walk up residential. (Jocelyn Doll - Revelstoke Review)
‘This is failure’: Construction noise frustrates neighbours on Victoria Rd. E

The city and business are trying to reduce noise, but residents want the project gone

Eric Schwenck was awarded the Train-to-Train Coach Goldie award by BC Alpine this year. He coached the Revelstoke Ski Club U14s last winter. (Katie Findlay photo)
Revelstoke Ski Club coach and volunteer recognized in the Goldie Awards

BC Alpine recognizes ski clubs, skiers and volunteers with awards every year

Moving the old jail from Third Street West to Carlson Street in May 1971. (Estelle Dickey photo; Revelstoke Museum and Archives photo 9171)
Glimpses of Revelstoke’s past for May 13

Local history as recorded by the newspaper of the day

An avalanche near Highway 1 in Glacier National Park. Avalanche Canada will benefit from a $10 million grant from the B.C. government. (Photo by Parks Canada)
Avalanche Canada receives $10-million grant from B.C. government

Long sought-after funds to bolster organization’s important work

Barriere RCMP nabbed two suspects who were allegedly breaking into cabins in McLure. (File photo)
Thieves nabbed by Barriere Mounties during McLure break-ins

Police Service Dog Kody instrumental in making the arrest

(File photo)
Repeated cougar sighting on Okanagan Rail Trail

Plenty of bear sightings around the valley too

Join Black Press Media and Do Some Good
Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

B.C. Health Minister Adrian Dix and provincial health officer Dr. Bonnie Henry update the province’s COVID-19 vaccine program, May 10, 2021. (B.C. government)
B.C.’s COVID-19 infection rate stays below 500 a day over weekend

14 more deaths, down to 350 in hospital as of Monday

Royal Bay Secondary School’s rainbow crosswalk was vandalized shortly after being painted but by Monday, coincidentally the International Day Against Homophobia, Transphobia and Biphobia, the crosswalk had been cleaned up and students had surrounded it with chalk messages of support and celebration. (Zoe Ducklow/News Staff)
B.C. high’s school’s pride crosswalk restored following ‘hateful’ graffiti attack

Hate terms, racial slur, phallic images spray-painted at Greater Victoria high school

RCMP vest
Penticton beach brawl results in one arrest but no charges

People took to social media after a fight broke out at the fire pits at Okanagan Lake Saturday

Terrance Mack would have celebrated his 34th birthday on May 13, 2021. Mack’s family has identified him as the victim of a homicide in an apartment on Third Avenue in Port Alberni sometime in April. (SUBMITTED PHOTO)
Family identifies Ucluelet man as victim of Vancouver Island homicide

Terrance Mack being remembered as ‘kind, gentle’ man

A single motorcycle parked outside of the Kelowna Hells Angels clubhouse at 837 Ellis Street on July 9, 2020. (Michael Rodriguez - Capital News)
Kelowna Hells Angels prospect sentenced to 9 months in jail for aggravated assault

Colin Michael Bayley pleaded guilty to the downtown Kelowna assault earlier this month

Most Read