OPEC and its allies announced on Friday cuts in crude output of 1.2 million barrels per day (bpd) to balance the global oil market.
Members agreed the group will curb production by 800,000 bpd, while non-OPEC oil producers – including Russia – will cut production by 400,000 bpd, Anadolu reported.
The supply cuts will be calculated from October 2018 production levels and will take effect in January. The cuts are expected to last six months, according to a joint communique from the group and its allies, dubbed OPEC+. The deal and its impact on the market will be reviewed in April 2019, when OPEC+ will meet to make decisions for July and beyond.
Crude prices jumped more than five per cent following the news, with international benchmark Brent Crude climbing six per cent to $63.70. The US benchmark was at $54.22, a gain of 5.3 per cent.
OPEC explained that the outlook for global economic growth in 2019 is slightly lower than 2018, which could potentially have ramifications for global oil demand. That means Saudi Arabia, the world’s biggest crude oil exporter, would absorb most of the cuts by curbing its supply by 500,000 bpd.
“I thank Saudi Arabia for taking a bigger burden than its market share,” Russian Energy Minister Alexander Novak said during the press conference. Novak added that OPEC+ countries would continue to monitor the global oil market.
President of the OPEC conference, Suhail Mohamed Al-Mazrouei, told reporters that Iran – which faces US sanctions on its crude exports – along with Libya and Venezuela, would be exempt from the agreement.
The deal on cuts is likely to anger US President Donald Trump, with veteran OPEC watchdog Gary Ross explaining: “US political pressure is clearly dominant in this OPEC meeting, limiting the scope of Saudi measures to rebalance the market.”