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

The Abbotsford International Airshow is back for 2021 with the ‘SkyDrive’ concept.
Abbotsford International Airshow returns for 2021 with ‘SkyDrive’

New format features a drive-in movie type experience, show set for Aug. 6 to 8

A young couple walks through the Othello Tunnels just outside of Hope. (Jessica Peters/Black Press)
Hope’s Othello Tunnels fully open to the public

Geological testing proved the area safe enough to open for the first time in more than a year

FILE
70 per cent of people aged 12 and older in Agassiz-Harrison have been vaccinated

More than 80 per cent of adults aged 50 and older have been vaccinated, as of June 10

Raeya Evie Duncan was the 100th baby born at Chilliwack General Hospital for the month of May. She is seen here with her parents Alysha Williams and Andrew Duncan on June 12, 2021. (Jenna Hauck/ Chilliwack Progress)
Baby boom in Chilliwack as record number of infants born at CGH in May

‘COVID babies are coming out,’ says dad of 100th baby born at Chilliwack General Hospital last month

Agassiz Agricultural Hall hosts COVID-19 vaccination clinics every Wednesday. District officials reported more than 300 doses are administered per week. (Adam Louis/Observer)
Walk-in COVID vaccine clinic scheduled for Wednesday

Walk-in appointments available while supplies last from 3 p.m. to 6 p.m.

Maxwell Johnson is seen in Bella Bella, B.C., in an undated photo. The Indigenous man from British Columbia has filed complaints with the B.C. Human Rights Tribunal and the Canadian Human Rights Commission after he and his granddaughter were handcuffed when they tried to open a bank account. THE CANADIAN PRESS/HO-Heiltsuk Nation, Damien Gillis, *MANDATORY CREDIT*
VIDEO: Chiefs join human rights case of Indigenous man handcuffed by police in B.C. bank

Maxwell Johnson said he wants change, not just words, from Vancouver police

For more than a year, Rene Doyharcabal and a small group of neighbours in Langley’s Brookswood neighbourhood have been going out every evening to show support for first responders by honking horns and banging pots and drums. Now, a neighbour has filed a noise complaint. (Langley Advance Times file)
Noise complaint filed against nightly show of support for health care workers in B.C. city

Langley Township contacted group to advise of complaint, but no immediate action is expected

A nurse prepares a shot of the COVID-19 vaccine at the Yukon Convention Centre in Whitehorse on Wednesday, March 3, 2021. THE CANADIAN PRESS/Mike Thomas
Vancouver couple pleads guilty to breaking Yukon COVID rules, travelling for vaccine

Chief Judge Michael Cozens agreed with a joint sentencing submission,

An inmate in solitary confinement given lunch on Tuesday, May 10, 2016. THE CANADIAN/Lars Hagberg
22-hour cap on solitary confinement for youth in custody still too long: B.C. lawyer

Jennifer Metcalfe was horrified to hear a youth had spent a total of 78 straight days in isolation

People line up to get their COVID-19 vaccine at a vaccination centre, Thursday, June 10, 2021 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Vaccines, low COVID case counts increase Father’s Day hope, but risk is still there

Expert says people will have to do their own risk calculus before popping in on Papa

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

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

B.C. Premier John Horgan listens as Finance Minister Selina Robinson presents the province’s latest budget, April 20, 2021. The budget projects $19 billion in deficits over three years. (Hansard TV)
B.C. government budget balloons, beyond COVID-19 response

Provincial payroll up 104,000 positions, $10 billion since 2017

COVID-related trash is washing up on shorelines across the world, including Coldstream’s Kal Beach, as pictured in this May 2021 photograph. (Jennifer Smith - Black Press)
Shoreline cleanup finds COVID-related trash increased during height of the pandemic

Great Canadian Shoreline Cleanup reports litter from single-use food packaging nearly doubled

Most Read