After several hours of arduous negotiations, the Organization of Petroleum Exporting Countries (OPEC) and other major producers jointly agreed to cut oil pumping by 1.2 million barrels per day.
The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producers led by Russia agreed Friday to cut oil production by 1.2 million barrels per day (bdp) from January 2019, despite pressure from the U.S. President Donald Trump to not decrease global oil supply.
The block will lower its production to 800 million barrels per day (bpd) against the levels of October, while its external allies will provide an additional cut of 400 million bpd.
As a result of the announcement, oil prices rose around 5 percent to more than US$63 a barrel, given that the combined reduction of 1.2 billion bpd is higher than the minimum of 1 million bpd expected by the market.
Saudi Arabia confronted Trump's request for OPEC to refrain from reducing oil supplies. “Saudi economic self-interest trumps Trump,’’ Mike Rothman, president of Cornerstone Analytics Ltd., said to BruDirect.
For its part, Russia promised to reduce its production by 228,000 bpd, although its cuts would be gradual and take several months. Iraq, the OPEC's second largest producer, pledged to reduce 140,000 bpd.
Iran, Libya and Venezuela received exemptions, which means that these countries will not have to reduce their oil production. A reduction in global production will support Iran because oil prices would rise in the short run, amid Washington's attempts to stifle the economy of OPEC's third largest producer.
"President Trump will not be pleased to see today's headlines, but his reaction's intensity will depend mainly on whether oil prices rise sharply in the coming days," Bob McNally, president of Rapidan Energy Group, said.
Venezuela's President Nicolas Maduro affirmed, according to Xinhua, that the agreement will stabilize oil prices.
"[The agreement] will allow the stabilization of prices at a fair level for producers, fair for consumers, fair for the economy in general," said President Maduro, commenting that the agreement has also served "to maintain the alliance strategy between OPEC countries and non-OPEC oil producing countries."