OPEC strike production cut agreement with 11 non-OPEC countries

VIENNA, Dec 12 (PRIME) -- OPEC and 11 non-OPEC countries agreed on December 11 to cut the combined oil production by 1.8 million barrels a day in order to balance supply and demand.

At a meeting on November 30, OPEC agreed decrease daily output by 1.2 million barrels to 32.5 million barrels. On December 11, non-OPEC countries coordinated output reduction by 558,000 barrels, which includes Russia that agreed to cut production by 300,000 barrels. The agreement will be in force from January 2017 until the end of June with a possibility of prolongation.

Russian Energy Minister Alexander Novak told reporters that the agreement will speed up market stabilization, help raise investment and ensure consistent development of the industry. One should not look back on risks of the U.S. increasing its shale oil output, he added.

Saudi Arabian Energy Minister Khalid Al-Falih said that the participants of the agreement did not aim to ensure a certain level of oil prices, because it will be the market which will find a balance price. He also said that the agreement may be prolonged after June 2017 if the bearish trend still prevails at the market.

According to an OPEC November report, the world oil production amounted to 96.32 million barrels a day in October, meaning that the 1.8 million barrel cut accounts for almost 2% of output. Besides OPEC, Russia, Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Equatorial Guinea, Sudan, and South Sudan will cut production.

Kazakhstan will decrease daily production by 20,000 barrels, Azerbaijan by 35,000 barrels, and Mexico by 100,000 barrels. Saudi Arabia will start cutting output from January and may reduce it by even more than the 486,000 barrels set in the agreement.

The countries will create a monitoring committee, consisting of Venezuela, Kuwait, Algeria, Russia, and Oman, and Novak said that the committee’s first meeting may take place in January. Al-Falih said that the memorandum allows all countries to make their own decisions on measures to reach the agreed output level.

Novak said that Russia will cut production gradually and reach the target reduction level of 300,000 barrels in April–May, while by the end of March the cut will amount to 200,000 barrels a day. The target output level for Russia is 10.947 million barrels, he said.

All Russian companies are to participate in the agreement voluntarily and no punishment is envisaged for those that fail to decrease output. The ministry will discuss the situation with local oil producers in the week starting from Monday, and companies are expected to cut production in proportion to their contribution to combined output, he said.

The balance of supply and demand on the world oil market may be reached in July–September or October–December 2017, and the price of U.S. $55–60 per barrel is comfortable, Novak said.

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