OPEC agrees to deal to cut oil output, despite Trump pressure

by Ben Pena December 7, 2018, 0:30
OPEC agrees to deal to cut oil output, despite Trump pressure

Saudi Energy Minister Khalid Al-Falih said he isn't confident of an agreement after discussions of a 1 million million-barrel-a-day output reduction concluded without an agreement. Whether to exempt Iran from making any cuts was one sticking point in the meeting, said a delegate.

Crude prices began falling in October and continued to plunge last month because of oversupply and fears weaker global economic growth would dampen energy demand.

The Saudi minister pointedly said Washington should back off. However, he noted that all the participants will be listened to in order to arrive at a consensus on the issue.

The shift to net exports is the dramatic result of an unprecedented boom in American oil production, with thousands of wells pumping from the Permian region of Texas and New Mexico to the Bakken in North Dakota to the Marcellus in Pennsylvania.

At a December 2016 meeting, OPEC members had agreed to a production cut to battle a supply glut that saw oil prices drop to $25 per barrel.

U.S. President Donald Trump continues to call on OPEC to keep oil prices low, because "The World does not want to see, or need, higher oil prices!".

The price of a barrel of Brent, the European benchmark, fell four percent to below $60 on Thursday, hit by the Saudi comments, which were taken on the markets to be very cautious, and concerns over an economic slowdown.

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In a sign of easing tensions between the world's two biggest economies, Chinese oil trader Unipec plans to resume U.S. crude shipments to China by March after the Xi-Trump deal at the G20 meeting reduced the risk of tariffs being imposed on these imports, people with knowledge of the matter said.

Some experts saw that as a tactical move by OPEC countries to not announce a production level as they prepare to ask Russian Federation and several other smaller non-OPEC countries to also cut their output. Delegates said details of how to share that out and the extent of the contribution from non-OPEC allies remained unresolved.

"We don't need permission from anyone to cut", said Falih on Thursday. Production at 11.7 million bpd is more than what each of Russian Federation and Saudi Arabia pumped in November, although the Saudis are also expected to have reached record highs in their production last month.

"The US is now a major player in the export market", said Brian Kessens, who helps manage $US16 billion at Tortoise in Leawood, Kansas.

Zanganeh said the estimated surplus now on the market amounted to 1.3-2.4 million barrels per day. "Given the recent ramp-up in supply from these producers, this represents a year-on-year decline in crude output of just 0.2 million barrels per day for 2019", Hittle said.

Possibly complicating any Opec decision is the crisis around the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October.

According to information published in OPEC's monthly oil report, Saudi Arabia's crude oil production in the third quarter ended September 2018 increased to 10,422 thousand barrels per day (tb/d), from 9,992 tb/d recorded in the corresponding quarter a year ago.

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