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Opec agrees to cut output as Saudis soften stance on Iran

The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State

Grant Smith Wael Mahdi & Javier Blas | Bloomberg 

oil, crude, gas, refinery, plant
Representative image of an oil refinery

The Organization of the Petroleum Exporting Countries (Opec) clinched a deal to curtail oil supply, confounding skeptics as the need to clear a record global crude glut - and prove the group’s credibility - brought its first cuts in eight years. Crude rose as much as 8.8 per cent in London.

will reduce output to 32.5 million barrels a day, Iranian Oil Minister Bijan Namdar Zanganeh told reporters in following a ministerial meeting on Wednesday. The breakthrough deal, effective January, showed an acceptance by that Iran, as a special case, can still raise production.

is ditching a pump-at-will policy introduced in 2014 to resume its traditional role as price fixer. The shift - aimed at draining a crude glut that’s pushed down prices for two years — will help revive the tattered finances of oil-producing countries and will reverberate in markets around the world, from the Canadian dollar to Nigerian bonds to US shale equities.

“This should be a wake-up call for sceptics who have argued the death of Opec,” said Amrita Sen, chief oil analyst at Energy Aspects. “The group wants to push inventories down.”

After weeks of often tense negotiations, the eventual alignment of Opec’s biggest producers points to the increasing dominance of among the group’s top ranks. It’s allowed to raise output to about 3.8 million barrels a day, a victory for a country that’s long sought special treatment as it recovers from sanctions. previously proposed that its regional rival limit output to 3.707 million barrels a day, delegates said.

The agreement, which also calls for a reduction of about 600,000 barrels a day by non-countries, pushed up Brent crude by as much as $4.08 to $50.46 a barrel. Still, prices remain at half their level of mid-2014.

The economics of the deal are “incredibly appealing,” Jeff Currie, global head of commodities research at Goldman Sachs Group Inc., said in an interview with Bloomberg Television. The main aim of the cuts is “inventory normalisation,” he said.

Saudi Arabia, which raised oil production to a record this year, will reduce output by 486,000 barrels a day to 10.058 million a day, an document shows. Iraq, Opec’s second-largest producer, agreed to cut by 210,000 barrels a day from October levels. 

The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State.

Bullish Deal

The United Arab Emirates and Kuwait will reduce output by 139,000 barrels a day and 131,000 a day respectively, the document shows.

Non-member Russia, also pumping at a post-Soviet record, will cut by as much as 300,000 barrels a day “conditional on its technical abilities,” Energy Minister Alexander Novak said in Moscow.

“What was announced so far is bullish, but January is still far away,” said Giovanni Staunovo, an analyst at UBS Group AG. “December will still see ongoing record production, but market participants might ignore it. It does seem as though will cut, which if implemented is also positive.”

Russia, the biggest producer outside the bloc, had previously resisted calls to trim its production, insisting it would only consider a freeze. plans to hold talks with non-producers next week in Doha.

The strength of the deal will depend on whether all parties deliver on their commitment. and its allies the United Arab Emirates and Kuwait have traditionally stuck to their cuts, but some others haven’t, particularly when prices are low. Any doubt in the market could once again see prices come under pressure. 

The last two years have been painful for Opec: The group will earn $341 billion from oil exports this year, according to the US Energy Information Administration. That’s down from $753 billion in 2014 before prices crashed, and a record $920 billion in 2012.

The group will meet again on May 25 next year, at which point it intends to extend the cuts by another six months, Qatari Energy Minister Mohammed Al Sada told reporters in Vienna.

Indonesia requested a freeze of its membership. Its suspension won’t affect the size of the group’s production cut, one delegate said. 

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Opec agrees to cut output as Saudis soften stance on Iran

The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State

The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State
The Organization of the Petroleum Exporting Countries (Opec) clinched a deal to curtail oil supply, confounding skeptics as the need to clear a record global crude glut - and prove the group’s credibility - brought its first cuts in eight years. Crude rose as much as 8.8 per cent in London.

will reduce output to 32.5 million barrels a day, Iranian Oil Minister Bijan Namdar Zanganeh told reporters in following a ministerial meeting on Wednesday. The breakthrough deal, effective January, showed an acceptance by that Iran, as a special case, can still raise production.

is ditching a pump-at-will policy introduced in 2014 to resume its traditional role as price fixer. The shift - aimed at draining a crude glut that’s pushed down prices for two years — will help revive the tattered finances of oil-producing countries and will reverberate in markets around the world, from the Canadian dollar to Nigerian bonds to US shale equities.

“This should be a wake-up call for sceptics who have argued the death of Opec,” said Amrita Sen, chief oil analyst at Energy Aspects. “The group wants to push inventories down.”

After weeks of often tense negotiations, the eventual alignment of Opec’s biggest producers points to the increasing dominance of among the group’s top ranks. It’s allowed to raise output to about 3.8 million barrels a day, a victory for a country that’s long sought special treatment as it recovers from sanctions. previously proposed that its regional rival limit output to 3.707 million barrels a day, delegates said.

The agreement, which also calls for a reduction of about 600,000 barrels a day by non-countries, pushed up Brent crude by as much as $4.08 to $50.46 a barrel. Still, prices remain at half their level of mid-2014.

The economics of the deal are “incredibly appealing,” Jeff Currie, global head of commodities research at Goldman Sachs Group Inc., said in an interview with Bloomberg Television. The main aim of the cuts is “inventory normalisation,” he said.

Saudi Arabia, which raised oil production to a record this year, will reduce output by 486,000 barrels a day to 10.058 million a day, an document shows. Iraq, Opec’s second-largest producer, agreed to cut by 210,000 barrels a day from October levels. 

The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State.

Bullish Deal

The United Arab Emirates and Kuwait will reduce output by 139,000 barrels a day and 131,000 a day respectively, the document shows.

Non-member Russia, also pumping at a post-Soviet record, will cut by as much as 300,000 barrels a day “conditional on its technical abilities,” Energy Minister Alexander Novak said in Moscow.

“What was announced so far is bullish, but January is still far away,” said Giovanni Staunovo, an analyst at UBS Group AG. “December will still see ongoing record production, but market participants might ignore it. It does seem as though will cut, which if implemented is also positive.”

Russia, the biggest producer outside the bloc, had previously resisted calls to trim its production, insisting it would only consider a freeze. plans to hold talks with non-producers next week in Doha.

The strength of the deal will depend on whether all parties deliver on their commitment. and its allies the United Arab Emirates and Kuwait have traditionally stuck to their cuts, but some others haven’t, particularly when prices are low. Any doubt in the market could once again see prices come under pressure. 

The last two years have been painful for Opec: The group will earn $341 billion from oil exports this year, according to the US Energy Information Administration. That’s down from $753 billion in 2014 before prices crashed, and a record $920 billion in 2012.

The group will meet again on May 25 next year, at which point it intends to extend the cuts by another six months, Qatari Energy Minister Mohammed Al Sada told reporters in Vienna.

Indonesia requested a freeze of its membership. Its suspension won’t affect the size of the group’s production cut, one delegate said. 

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Business Standard
177 22

Opec agrees to cut output as Saudis soften stance on Iran

The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State

The Organization of the Petroleum Exporting Countries (Opec) clinched a deal to curtail oil supply, confounding skeptics as the need to clear a record global crude glut - and prove the group’s credibility - brought its first cuts in eight years. Crude rose as much as 8.8 per cent in London.

will reduce output to 32.5 million barrels a day, Iranian Oil Minister Bijan Namdar Zanganeh told reporters in following a ministerial meeting on Wednesday. The breakthrough deal, effective January, showed an acceptance by that Iran, as a special case, can still raise production.

is ditching a pump-at-will policy introduced in 2014 to resume its traditional role as price fixer. The shift - aimed at draining a crude glut that’s pushed down prices for two years — will help revive the tattered finances of oil-producing countries and will reverberate in markets around the world, from the Canadian dollar to Nigerian bonds to US shale equities.

“This should be a wake-up call for sceptics who have argued the death of Opec,” said Amrita Sen, chief oil analyst at Energy Aspects. “The group wants to push inventories down.”

After weeks of often tense negotiations, the eventual alignment of Opec’s biggest producers points to the increasing dominance of among the group’s top ranks. It’s allowed to raise output to about 3.8 million barrels a day, a victory for a country that’s long sought special treatment as it recovers from sanctions. previously proposed that its regional rival limit output to 3.707 million barrels a day, delegates said.

The agreement, which also calls for a reduction of about 600,000 barrels a day by non-countries, pushed up Brent crude by as much as $4.08 to $50.46 a barrel. Still, prices remain at half their level of mid-2014.

The economics of the deal are “incredibly appealing,” Jeff Currie, global head of commodities research at Goldman Sachs Group Inc., said in an interview with Bloomberg Television. The main aim of the cuts is “inventory normalisation,” he said.

Saudi Arabia, which raised oil production to a record this year, will reduce output by 486,000 barrels a day to 10.058 million a day, an document shows. Iraq, Opec’s second-largest producer, agreed to cut by 210,000 barrels a day from October levels. 

The country had previously pushed for special consideration, citing the urgency of its offensive against Islamic State.

Bullish Deal

The United Arab Emirates and Kuwait will reduce output by 139,000 barrels a day and 131,000 a day respectively, the document shows.

Non-member Russia, also pumping at a post-Soviet record, will cut by as much as 300,000 barrels a day “conditional on its technical abilities,” Energy Minister Alexander Novak said in Moscow.

“What was announced so far is bullish, but January is still far away,” said Giovanni Staunovo, an analyst at UBS Group AG. “December will still see ongoing record production, but market participants might ignore it. It does seem as though will cut, which if implemented is also positive.”

Russia, the biggest producer outside the bloc, had previously resisted calls to trim its production, insisting it would only consider a freeze. plans to hold talks with non-producers next week in Doha.

The strength of the deal will depend on whether all parties deliver on their commitment. and its allies the United Arab Emirates and Kuwait have traditionally stuck to their cuts, but some others haven’t, particularly when prices are low. Any doubt in the market could once again see prices come under pressure. 

The last two years have been painful for Opec: The group will earn $341 billion from oil exports this year, according to the US Energy Information Administration. That’s down from $753 billion in 2014 before prices crashed, and a record $920 billion in 2012.

The group will meet again on May 25 next year, at which point it intends to extend the cuts by another six months, Qatari Energy Minister Mohammed Al Sada told reporters in Vienna.

Indonesia requested a freeze of its membership. Its suspension won’t affect the size of the group’s production cut, one delegate said. 

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