Oil Prices Jump After OPEC Agrees To Bigger-Than-Expected Production Cut

Oil Prices Jump After OPEC Agrees To Bigger-Than-Expected Production Cut

Oil Prices Jump After OPEC Agrees To Bigger-Than-Expected Production Cut

Iran gave OPEC the green light on Friday to reduce oil output by around 0.8 million barrels per day from 2019 after finding a compromise with rival Saudi Arabia over a possible exemption from the cuts, an OPEC source said.

Oil prices went up about 5%.

West Texas Intermediate and worldwide benchmark Brent crude oil futures finished higher last week, helped by the news that OPEC along with other major exporters including Russian Federation reached an agreement to reduce production in an effort to curtail supply and stabilize prices.

OPEC and Russian Federation have agreed to cut production to 1.2 million barrels of oil per day from January 1 next year. In June, partly in response to the USA renewal of sanctions on Iran and to offset declines in other producers, such as Venezuela, OPEC reversed course and began opening the spigots.

On paper, the shift to net oil exports means that the U.S.is today energy independent, achieving a rhetorical aspiration for generations of American politicians, from Jimmy Carter to George W. Bush.

On Twitter Wednesday, Trump urged OPEC not to restrict oil flows, but since then has not publicly addressed the market.

"OPEC group countries are contributing 800,000 barrels per day as a cut, and the non-OPEC (countries) will be contributing 400,000 barrels per day", Emirati Oil Minister Suhail Mohamed al-Mazrouei said at a news conference. Moscow insists its cut should be gradual and reconsidered after the first quarter since the market may shift, the delegate said, asking not to be identified discussing private deliberations.

Oil economists agree that a reduction is needed to stem a further slide in prices, which fell 30 percent in October, and OPEC's decision was praised by many market analysts.

The Trump administration imposed the second wave of sanctions against Iran in November in which a universal ban on the country's oil exports was cited as a primary objective. USA crude futures lost 2.7 percent on the day, while Brent crude dropped by 2.4 percent.

He added: "The fact that the OPEC-Russia alliance is still holding matters as much as the details of the deal itself".

Crude prices extended losses Thursday on concerns about oversupply and low demand expected next year. The Delaware Basin, the less drilled part of the field, holds more than twice the amount of crude as its sister, the Midland Basin, the U.S. Geological Service said Thursday.

Oil prices between $55 to $65 per barrel are a "sweet spot for the US producer and the USA consumer", said Rob Thummel, portfolio manager at energy investment manager Tortoise Capital.

The Saudi oil minister refrained from answering a question on whether the OPEC decision might prompt Washington to withdraw support, but said Saudi-U.S. relations were based on shared values.

Prices for western Canadian oil continued to strengthen on Friday as markets adjusted to a plan by the Alberta government to eliminate a glut of oil that has plagued producers for months. OPEC will cut 0.8 million barrels per day from January with additional contributions of 0.4 million barrels per day of cuts, Iraqi Oil Minister Thamer Ghadhban said. Iran, OPEC's third-largest producer, has considerably reduced its oil exports so far.

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