OPEC announces further supply cuts

By IAR Desk

OPEC and its allies oil exporters have agreed to make a hefty cut in oil supply on Friday, Deember 6th, triggering a jump in oil prices. The 7^th OPEC and non-OPEC Ministerial Meeting was held in Vienna, Austria,  under the Co-Chairmanship of OPEC’s President,  Manuel Salvador Quevedo Fernandez, People’s Minister of Petroleum of the Bolivarian Republic of Venezuela, and  Alexander Novak, Minister of Energy of the Russian Federation.

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

According to Al Arabiya, this move by OPEC and its friends would tighten their grip over global oil markets as they prepare for a new wave of production from rival producers next year.

“This deal puts a floor under prices and sets the stage for higher prices as the economic environment improves,” Al Arabiya quoted  Gary Ross, CEO of Black Gold Investors, as saying.

He also said oil prices were poised to move higher on the back of OPEC’s positive approach to market management.

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

“The world expects us to behave and act — as we have always been with the world economy — we have always been a responsible and responsive producer. We do it both ways. When the world requires additional production, we come first to proffer that urgent need, and when the market requires some stabilization we also come to the aid of the market and we do that voluntarily,” Al Arabiya quoted him as saying.

In its statement OPEC and its allies announed that they will hold an extraordinary meeting on 5 March 2020, three months before the next scheduled meeting.

Any price gains from the OPEC+ cut are likely to benefit American producers not party to any supply curbing agreement. U.S. drillers have been breaking production records even as they have cut the number of oil rigs in operation for 12 straight months, boosting the United States to the top world producer spot. In 2018 the US re-emerged as the world’s largest oil producer.

Aditi Bhaduri

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