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OPEC agrees joint 1.2 mn bpd cut with partners

AFP  |  Vienna 

members and 10 other producing nations agreed Friday to cut output by 1.2 million barrels a day in a bid to boost prices.

ministers reached the deal -- which takes effect from January 1 but has already sent prices surging on markets -- after two days of talks at headquarters in

"We'll cut 1.2 million bpd total," Iraq's told reporters after a meeting in

He said the amount -- equivalent to just over one percent of global production -- would comprise an 800,000 bpd reduction by the 14 members of and 400,000 by the 10 non-cartel partners, including

OPEC and its partners, which together account for around half of global output, agree that a glut in the market had led to falling by more than 30 per cent in two months.

Friday's deal does not however include Iran, which had demanded an exemption from any production cuts to take into account the effects of punishing US sanctions on its sector.

"Officially is exempted from this resolution," UAE Oil said.

The price of Brent crude, the European benchmark, surged five percent on Friday after reports of the deal emerged.

But some said the reduction may not be enough to keep buoyant.

"I would describe the cuts as close but not close enough with regards to eliminating the global oil glut," said Stephen Brennock, at brokerage

"A combined reduction of 1.5 mbpd was needed to avoid a supply surplus in the first half of next year," he told AFP.

"Accordingly, the price outlook for the coming few months still remains skewed to the downside despite today's knee-jerk reaction."

The deal was announced after Russian held bilateral meetings with several counterparts, including Iranian before the full meeting.

However, the major players all had their own reasons to look to others to act first and the details of how any cuts will be shared out will be key.

For Russia, which leads the non-member countries in the so-called OPEC+ alliance, "it's much more difficult to cut than for other countries, because of our climatic conditions," Novak said on Thursday.

OPEC Kingpin Saudi Arabia, meanwhile, had to bear in mind pressure from the after demanded in a tweet on Wednesday that the cartel boost output so as to lower prices and help the economy.

The kingdom's diplomatic position however has been badly weakened by the furore over the killing of Saudi

Trump insists he will stick by despite the outrage but he has been also ramping up the pressure for more oil.

Saudi insisted Thursday that "we don't need permission from anyone to cut" production.

Iran, Saudi Arabia's geopolitical rival and OPEC's third-largest producer, had suggested it is in favour of deeper cuts -- despite its demand for an exemption.

In June, OPEC and its partners agreed to allow for a boost in production by and to compensate for the expected losses in output from after the US dramatically withdrew from the nuclear deal in May and decided to re-impose tough sanctions.

However, the US then granted temporary waivers to eight countries, including crucially China, to allow them to carry on importing Iranian oil, contributing to a plunge in which wiped out the gains seen since early 2017.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, December 07 2018. 23:30 IST