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December 7, 2019

OPEC+ agree to 500,000 barrel per day production cut


December 7, 2019

Vienna: The OPEC group of oil producing countries and their allies -- including Russia -- agreed on Friday to a production cut of 500,000 barrels per day in addition to their current agreement.

Ministers gathered at OPEC headquarters in Vienna "decided for an additional adjustment of 500 (thousand barrels per day)", effective as of 1 January 2020, according to a statement issued after the meeting.

This would bring production 1.7 million barrels per day below October 2018 levels. However, the group said that "in addition, several participating countries, mainly Saudi Arabia, will continue their additional voluntary contributions," meaning the overall production cut would be 2.1 million barrels per day.

The additional cuts by the Organization of the Petroleum Exporting Countries and allies including Russia - a grouping known as OPEC+ - will last throughout the first quarter next year. The group will meet again in early March for an extraordinary meeting to set its policy.

OPEC members had been aiming for a cut in order to stem pressure on prices from abundant reserves and weak global economic growth. OPEC will shoulder around two thirds of the additional cuts.

Oil prices surged following the announcement, with US benchmark WTI and its European counterpart Brent both nearly two percent higher shortly after 1500 GMT.

Saudi Energy Minister Prince Abdulaziz bin Salman said the Kingdom, the world’s largest oil exporter and OPEC’s defacto leader, would continue a voluntary cut of 400,000 bpd.

He added that after improved compliance from other members, the actual cut will be effectively 2.1 million bpd.

Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.

Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range. –

OPEC and allied producers pump more than 40 percent of the world’s oil.

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