Historic Deal

Vienna : Eleven countries agreed yesterday to cut their oil output, teaming up with the OPEC cartel in an exceptional bid to end the world’s glut of crude and reverse a dramatic fall in income.

Russia and 10 other non-OPEC states will reduce their production by more than half a million barrels per day (bpd), OPEC announced.

The deal will take effect from the start of 2017 and last for six months, though it may be extended depending on market conditions.

“I am happy to announce that a historic agreement has been reached,” said Qatar’s Energy Minister Mohammed Bin Saleh Al-Sada, whose country holds the rotating presidency of the Organization of the Petroleum Exporting Countries (OPEC).

On November 30 its members announced a slash in output by 1.2 million barrels per day (bpd) beginning in January, to 32.5 million bpd.

Under that deal, OPEC called on non-member producer states to lower their output by 600,000 bpd. Saturday’s deal approves cuts totalling 558,000 bpd. 

Russia had already signalled it would provide half of that production cut in the first half of 2017.

Among the other countries that will contribute cuts Kazakhstan agreed to reduce production by 20,000 bpd, Mexico 100,000 bpd, Oman 40,000 bpd and Azerbaijan 35,000 bpd, according to Bloomberg.

The deal also includes Malaysia, Bahrain, Equatorial Guinea, Sudan, South Sudan and Brunei.

“This is a truly historic event, the first time that so many oil-producing countries are meeting in one room, to accomplish what we’ve done,” Russian Energy Minister Alexander Novak told a press conference.

“In the room we had more than half of the global oil” production, he said.

In a statement following the meeting, OPEC said the other oil giants were working “to achieve oil market stability in the interest of all oil producers and consumers”.

A monitoring committee, comprising three OPEC and two non-OPEC members, will now be set up.

And in another signal to the markets, the cartel’s leading producer Saudi Arabia announced that it would go “substantially” beyond its commitment of production cuts made last week.

Price slump 

In a speech to the conference earlier, Novak stressed the plunge in oil prices had led to “severe consequences”.

“What the past two months have shown is that there is a growing consensus among producers that the market recovery process has taken far too long... It has had a major impact on all our countries, in terms of economic growth, heavy losses in revenue and deep social spending cuts.”

As for the impact on consumers, he said: “We only have to look at the damaging levels of deflation in some OECD countries, as well as the record low interest rates, sometimes in negative territory in real terms, which is partly attributed to lower oil prices.”

Bloomberg calculations, based on OPEC data, indicated there would be little overall reduction in record oil inventories in 2017 -- even if OPEC could convince non-members to come on board.