Oil prices surge on OPEC agreement

If OPEC is to also negotiate with non-OPEC crude producers like Russian Federation to cut production, the total cuts could be around 1.80 million barrels per day, which could stabilise the crude prices in the long-term.

“Opec has proved to the skeptics that it is not dead”. “Inventories have continued to weigh down on prices” and all of OPEC wants to see prices higher, he said.

The cut did not come without a casualty, however.

One of the biggest concerns for the agency is the uncertainty of the commitment of all OPEC members to the agreed cut, and in light of historical evidence, this uncertainty is well justified.

Post-announcement, the price for Brent crude futures – which represents the global benchmark for oil prices hiked all the way above 10 per cent, standing at USD51.88 per barrel, Reuters reported.

Analysts said the cuts could leave the field open for other producers, especially US shale drillers.

The agreement came despite huge political hurdles.

Saudi Arabian energy minister Khalid al-Fali announced the deal at the end of a ministerial conference in Vienna.

That’s more than eight times actual daily global crude oil consumption. “I think, it will be a boost to global economic growth”.

Trump’s “America First” ideology could have impacts far beyond US borders, threatening the viability of OPEC’s output-reduction agreement and harmony within the cartel overall.

However, there were also words of warning from the likes of Goldman Sachs and other market analysts that markets should not expect oil price to hold at $60 if it reaches that level.

The OPEC on Wednesday made a decision to cut its oil output by 1.2 million barrels per day, setting the ceiling of oil production at 32.5 million barrels per day (bpd). For more on crude oil prices, read Part 1 of this series.

The deal is contingent on securing the agreement of non-OPEC producers to lower production by 600,000 million barrels per day. No. 2 producer, Iraq, also agreed to curb production, a surprise to many after the country pushed to be exempt in order to use oil revenue to fight ISIS militants.

Russia, which had long resisted cutting output, pushed its production to new record highs in recent months. While the country has been in talks with the cartel on adjusting production since the beginning of 2016, it has also raised output to record highs this year, exceeding 11 million barrels per day. In his statement, “Russia is ready to be a party to the deal that aims to stabilize the global oil market”.

“The range of outcomes is much more than “deal or no deal”-it is not black and white but rather with many shades of gray”.

Opec will hold talks with non-Opec producers on December 9. He stressed that OPEC’s deal “will be a lifeline for producers in the US, if OPEC lives up to this agreement”.

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