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.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A man wearing a mask against coronavirus walks past an NHS advertisement about COVID-19 in London, Tuesday, Feb. 2, 2021. (AP Photo/Alastair Grant)
92 new COVID-19 cases, no new deaths: Interior Health

The region is reporting 92 cases after the weekend

Gas prices jumped in Golden to 131.9c this week, a trend that’s supposed to continue into the summer. (Claire Palmer/Golden Star)
Columbia River-Revelstoke MLA Clovechok concerned as gas prices continue to rise

Fuel prices are supposed to skyrocket this summer as British Columbians await BCUC analysis

(PQB News file photo)
CSRD makes changes to yard waste tipping fee

The change will help standardize tipping fees for yard waste

Island Health chief medical officer Dr. Richard Stanwick receives a first dose of Pfizer vaccine, Dec. 22, 2020. (B.C. government)
COVID-19: B.C. seniors aged 90+ can start to sign up for vaccination on March 8

Long-term care residents protected by shots already given

The Okanagan’s first virtual wedding fair will be held Saturday, March 27. {Paul Rodgers photo)
Okanagan to host virtual wedding fair

Okanagan wine country is No. 1 destination for weddings - online event set for March 27

Langley resident Carrie MacKay shared a video showing how stairs are a challenge after spending weeks in hospital battling COVID-19 (Special to Langley Advance Times)
VIDEO: Stairs a challenge for B.C. woman who chronicled COVID-19 battle

‘I can now walk for six (to) 10 minutes a day’

Theodore, Alvin and Simon were found abandoned by a community mailbox, the Vernon BC SPCA said March 1. Now, they're looking for their forever home. (Facebook)
3 guinea pigs found abandoned near Vernon mailbox

Alvin and the pigs are up for adoption through Vernon’s BC SPCA

Left: Oakland County Jail. Right: Canuck Todd Bertuzzi on November 2, 2005. (CP/Chuck Stoody)
Former Vancouver Canuck Todd Bertuzzi arrested for suspected DUI: report

The Canadian winger had a complicated history in the NHL

Gary Leck, Facebook
Snow smashes through bedroom wall at Big White

Heavy snow fell from a roof on Monday afternoon crashing through a home

Jason Haskett and Rachel Williams celebrated one year off the streets in July 2020 thanks to finding a home at My Place in Vernon. (Jennifer Smith - Morning Star)
Supportive housing gives former homeless Okanagan couple hope

‘This building has helped us become stable and without it we’d probably still be out in the streets’

The south coast of B.C. as capture by the Copernicus Sentinel-2 mission. (European Space Agency)
VIDEO: Images of B.C.’s south coast from space released by European Space Agency

The satellite images focus on a variety of the region’s landmarks

A copy of the book “And to Think That I Saw It on Mulberry Street,” by Dr. Seuss, rests in a chair, Monday, March 1, 2021, in Walpole, Mass. Dr. Seuss Enterprises, the business that preserves and protects the author and illustrator’s legacy, announced on his birthday, Tuesday, March 2, 2021, that it would cease publication of several children’s titles including “And to Think That I Saw It on Mulberry Street” and “If I Ran the Zoo,” because of insensitive and racist imagery. (AP Photo/Steven Senne)
6 Dr. Seuss books won’t be published for racist images

Books affected include McElligot’s Pool, On Beyond Zebra!, Scrambled Eggs Super! and The Cat’s Quizzer

Most Read