OPEC Reaches Deal to Cut Oil Production Cartel representatives agree to cut output by 1.2 million barrels a day
By Benoit Faucon and Georgi Kantchev
Updated Nov. 30, 2016 12:03 p.m. ET
VIENNA—OPEC representatives reached a deal to cut oil production after months of wrangling Wednesday, in an effort to lift sagging prices and reassert the cartel’s influence over a market increasingly dominated by the U.S., Russia and others.
Delegates from the Organization of the Petroleum Exporting Countries agreed to cut production by 1.2 million barrels a day to 32.5 million, Iranian Oil Minister Bijan Zanganeh said, representing about 1% of global production.
Brent crude, the global benchmark that had soared in anticipation of a deal, extended earlier gains, trading 8.5% higher at $51.36. West Texas Intermediate crude oil was up 8.1% at $48.92.
OPEC members have said they were targeting prices as high as $55 to $60 a barrel, levels that would boost petroleum-dependent economies that have been badly damaged by two years of prices often below $50 a barrel.
The breakthrough comes after months of on-and-off-again negotiations that made many traders doubt an agreement could be reached. As recently as Tuesday, oil prices tumbled on market skepticism that clashing OPEC members and other major oil producers could come together on a meaningful deal.
“It’s a good day for the oil market, it’s a good for the oil industry,” said Saudi Energy Minister Khalid al-Falih. “Our friends from Russia and other non-OPEC countries have agreed to reciprocate and contribute significant volumes of cuts starting in January next year.”
Under the deal, Iran will be allowed to raise production to 3.79 million barrels a day, Mr. Zanganeh said, as the country claws back the market share it lost during years of Western sanctions. Iran has told fellow OPEC members it would be willing to restrict its production in early 2017.
Saudi Arabia will cut production to 486,000 barrels a day, while Iraq, which had expressed reluctance to sacrifice market share, will reduce output by 210,000 barrels a day. Iraq acquiesced to using independent estimates of its output at 4.55 million barrels a day, officials said.
A deal to cut more than 1 million barrels a day could keep prices steadily above $60 a barrel by the first quarter of 2017, according to London-based Energy Aspects. That would accelerate the end of a glut that has been slow to come for more than two years after the development of shale drilling and oil-sands production in North America.
