VIENNA (Reuters): OPEC and its Russia-led allies agreed on Friday to slash oil production by more than the market had expected despite pressure from US President Donald Trump to reduce the price of crude.
The producer club will curb output by 0.8 million barrels per day from January while non-OPEC allies contribute an additional 0.4 million bpd of cuts, Iraqi Oil Minister Thamer Ghadhban said after OPEC concluded two days of talks in Vienna.
Oil prices jumped about 5 percent to more than $63 a barrel by 1500 GMT as the combined cut of 1.2 million bpd was larger than the minimum 1 million bpd that the market had expected.
Saudi Arabia, de facto leader of the Organization of the Petroleum Exporting Countries, has faced demands from Trump to help the global economy by refraining from cutting supplies.
An output reduction also would provide support to Iran by increasing the price of oil amid attempts by Washington to squeeze the economy of OPEC’s third-largest producer.
“We will never address geopolitical issues at OPEC,” United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui told a news conference.
Russian Energy Minister Alexander Novak praised the ability of his Saudi counterpart Khalid al-Falih “to find a solution in the most difficult situation”, indicating Russia was on board.
The OPEC deal had hung in the balance for two days – first on fears that Russia would cut too little, and later on concerns that Iran, whose crude exports have been depleted by U.S. sanctions, would receive no exemption and block the agreement.
But after hours of talks, Iran gave OPEC the green light and Russia indicated it was ready to cut more.
A meeting of OPEC and non-OPEC producers quickly approved the deal, according to two OPEC sources.
The cut will last for six months from January, Ghadhban said, and take October as the baseline. OPEC and Russian output was lower in October than in November. However, OPEC might not disclose individual output quotas, sources said.