OPEC deal: Producers agree to oil output cut, first since 2008
* Under OPEC deal, Saudis to cut output by 0.5 million bpd
* Iraq to reduce production, Iran will raise slightly
* Qatar says Russia also joins cuts with 0.3 mln bpd
* Brent oil jumps 9 per cent to more than $50/barrel
* Indonesia suspends OPEC-membership after recently rejoining
Members of the Organisation of Petroleum Exporting Countries (OPEC) agreed on the first oil output cuts since 2008, as non-OPEC Russia agrees to join cuts for the first time in 15 years.
“OPEC has proved to the sceptics that it is not dead. The move will speed up market rebalancing and erosion of the global oil glut,” said OPEC watcher Amrita Sen from consultancy Energy Aspects.
Following news of the deal, the price for Brent crude futures, the international benchmark for oil prices, surged to settle up nearly nine per cent. They eased slightly in early Asian trading on concerns that other producers, especially U.S. shale drillers, could fill any gap.
The agreement came despite huge political hurdles. Iran and Russia are effectively fighting two proxy wars against Saudi Arabia, in Yemen and Syria, and many sceptics had said the countries would struggle to find a compromise.
Saudi Arabia takes “a big hit”
Saudi Energy Minister Khalid al-Falih said ahead of the meeting that the kingdom was prepared to accept “a big hit” on production to get a deal done.
“I think it is a good day for the oil markets, it is a good day for the industry and … it should be a good day for the global economy. I think it will be a boost to global economic growth,” he told reporters after the decision.
Fast-growing producer Iraq also agreed to curtail its booming output.
The cut did not come without a casualty, however. Indonesia, the producer group’s only East Asian member, said it would suspend its membership after rejoining only this year as it was not willing to comply with the output cuts sought.
Indonesia has a patchy OPEC membership history. After first joining in 1962, it left in 2009 as dwindling production meant that Southeast Asia’s most populous country had become a net importer of crude oil, which is against OPEC’s statute for full membership.
Despite this, it re-joined OPEC in early 2016. Indonesia’s suspension will not affect OPEC’s overall reduction as its share of cuts will be redistributed among other members.