OPEC has reportedly agreed a production cut – and oil is going wild

On Tuesday, the US benchmark fell $1.85, or 3.9 percent, to $45.23 a barrel.

The Saudis have always been hesitant to shoulder the lion’s share of a cut, while Iran had resisted reducing its own production, arguing that it has yet to recover its output levels hit by years of sanctions.

There remains disagreement among OPEC-members over which producers should cut by how much, and a plan for non-OPEC oil giant Russian Federation to participate has so far also failed.

But Iran, recently readmitted to world oil markets since the nuclear deal between Iran and the United States in 2015 and now free of economic sanctions, was anxious to increase production and make the most of its improved position.

OPEC will meet non-OPEC members in December again to discuss the situation.

OPEC began on Wednesday debating a deal to curtail oil production in an effort to prop up the price of crude, with Iran and Iraq resisting pressure from Saudi Arabia to participate fully in any action. A Bloomberg flash reports that an unnamed OPEC delegate says output will be cut be 1.2 million barrels per day to 32.5 million per day.

OPEC finally has a deal! The ambition for Wednesday’s meeting is to agree individual production targets for each country. Falih said that the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.

Brent traded at $46.48 per barrel, down 3.7 percent, in London, and overall prices are at half their level of mid-2014, with demand continuing to be dwarfed by global oversupply.

Last week, it was the Iraqi prime minister who first suggested that Iraq would be joining the OPEC cuts, saying that Baghdad would gain in oil revenues what it would lose in production.

Iranian semi-official news agency MEHR published an editorial on Sunday accusing Saudi Arabia of declaring a new “war on oil prices” and reneging on its promises to limit output.

Yet the group remains divided about how to share the curbs internally and Khalid Al-Falih, the Saudi oil minister, has opened the door to leave the group’s production unchanged. Some analysts now fear that US crude could plunge below $40 level if oil ministers leave Vienna empty handed.

Oil ministers from OPEC members Algeria and Venezuela traveled to Moscow on Tuesday to try to persuade non-OPEC Russia to take part in cuts instead of merely freezing output, which has reached new highs in the past year. It appears the Saudis accepted that Iran can raise output to about 3.9 million bpd, marking a victory for Tehran, which has long sought special treatment from Opec as it recovers from sanctions.

“With the cooperation and understanding of all member countries, we’ve been able to reach an agreement”, Sada, also Qatar’s energy minister, said. “And without a major cut, we see little reason why USA commercial crude oil inventories, now sitting at 489 million barrels, or 27% above the five-year average, should start to improve”.