OPEC members reach deal to cap oil output at 32.5 million bpd
Investing.com - The Organization of the Petroleum Exporting Countries reached an agreement on a deal to curb oil output following crunch talks in Vienna on Wednesday.
OPEC agreed to cap output at 32.5 million barrels per day, a cut of 1.2 million barrels a day.
In September, the producer cartel reached a preliminary agreement to cut production to between 32.5 million and 33 million barrels per day from current levels of 33.6 million barrels per day.
But rubber stamping a deal on the first OPEC supply cut since 2008 proved problematic during weeks of often strained negotiations, amid disagreements over which producers should cut and by how much.
The output deal will come into effect on January 1, 2017. The accord will last for six months, but can be extended and a decision will be made on May 25, 2017 when it is planned to review the agreement.
The 14-member cartel, which is responsible for a third of global oil production, is reining in output in a bid to reduce a global supply glut that has seen prices more than halve since mid-2014.
Confidence in non-OPEC participation in output reduction
The organization said the agreement was subject to Russia and other non-OPEC countries contributing a cut of another 0.6 million barrels per day.
In the press conference, OPEC president Mohammed bin Saleh al Sada said Russia has indicated that it will cut output by 300,000 barrels per day and that he was confident that the 600,000 total would be reached based on previous pledges by non-OPEC members.
Al Sada indicated that a meeting was scheduled in Doha for December 9 with non-OPEC producers to get the finalized rubber stamps, explaining that as those members did not belong to the cartel, OPEC could not personally make the agreement official. He insisted that he was confident of their agreement with the deal.
Member-agreed quota cuts
In response to a question, Al Sada further confirmed that Saudi Arabia had undertaken the largest cut, specifically 486,000 barrels per day.
According to the table showing the agreed cuts, that left Saudi Arabia's daily production at 10.058 million barrels per day (mpbd).
Furthermore it was agreed to Iran allow production to increase by 90,000 barrels to pre-sanction levels of 3.797 million barrels per day in a deal that was seen as a victory for Tehran.
Libya and Nigeria were also exempted from output cuts as their production has been hit by sanctions and attacks on oil installations.
In the second largest reduction in output, Iraq agreed to cut production by 210,000 barrels per day.
It was followed by the United Arab Emirates’ 139,000 barrel per day cut.
Among the rest of the members in decreasing order, Kuwait agreed on a 131,000 barrel reduction, Venezuela on 95,000, Angola by 87,000, Algeria by 50,000, Qatar by 30,000, Ecuador by 26,000, and Gabon by 9,000.
Of note, Indonesia voluntarily suspended its membership in the cartel. Al Sada explained that the country was a net exporter and that the other members had taken on the task of cutting to reach the 32.5 million target.