Top News: Non-OPEC Countries Join OPEC In Agreeing Oil Output Cut
VIENNA (Alliance News) – The Organisation of the Petroleum Exporting Countries managed to broaden its efforts to cut oil output on Saturday, when 11 countries outside this group joined a plan that is aimed at raising prices.
The non-OPEC countries agreed to slash their output by 558,000 barrels per day, OPEC President Mohammed al-Sada announced in Vienna.
Together with OPEC’s recent decision to reduce its production by 1.2 million barrels a day, Saturday’s agreement will take 1.76 million barrels per day out of the market in the first half of next year.
Participating countries said the deal could be extended for six more months if needed.
Although OPEC had aimed for a slightly higher contribution from non-OPEC countries, both sides hailed the deal that was concluded by oil ministers in Vienna.
“I believe that this is a truly historic event,” said Russian Energy Minister Alexander Novak, pointing out that the OPEC and non-OPEC countries represented at the talks account for more than half of global supplies.
Representing the world’s largest oil producer, Novak had led the group of non-OPEC countries that also included Mexico, Kazakhstan, Azerbaijan and Malaysia.
OPEC’s 13 active member countries decided in late November that they would bring their output down to a total of 32.5 million barrels per day early next year, in order to counter dwindling oil revenues and to revive investment in oil fields.
Saturday’s broad agreement that took one year to negotiate marks the first time since the 2008 financial crisis that OPEC and non-OPEC countries join forces to push up oil prices in this manner.
Prices plummeted in mid-2014. Since then, oil countries have been grappling with dwindling revenues and strained budgets, while oil companies have thrown future supply levels in doubt by stopping investments in oil fields.
Since OPEC members decided to limit their flow of oil last week, the benchmark price for Brent oil has risen about 15% to nearly USD55 per barrel.
Analysts have questioned whether OPEC will show more discipline than in the past and stick to the upper production limit of 32.5 million barrels that it has set itself for the start of next year.
Russia’s Novak told his fellow non-OPEC colleagues that the efficiency of the production cut would also hinge on them.
“I would like to stress that the whole deal depends on active and responsible participation by non-OPEC producers,” he said.
OPEC stressed that it plans to continue working with outside countries to influence markets.
“We believe it is vital to institutionalize a framework of cooperation between OPEC and non-OPEC producing countries,” said Qatari Energy Minister Mohammed, who currently presides over OPEC meetings.
Due to an oil boom in the US, prices dropped from above 100 dollars per barrel in June 2014 to below 30 dollars early this year.
OPEC initially kept flooding the market in an attempt to win back market shares from the US, since the cartel’s members can pump oil at lower cost than North American producers.
However, OPEC countries changed their minds and opted for a cut after the lower prices forced them to reduce social spending and threatened long-term revenues as oil field projects were delayed.