OPEC in first joint oil cut with Russia since 2001, Saudis take 'big hit'

Wed Nov 30, 2016 9:15pm EST
 
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By Rania El Gamal, Alex Lawler and Ahmad Ghaddar

VIENNA (Reuters) - OPEC has agreed its first oil output cuts since 2008 after Saudi Arabia accepted "a big hit" on its production and dropped its demand on arch-rival Iran to slash output, pushing up crude prices by around 10 percent.

Fast-growing producer Iraq also agreed to curtail its booming output, while non-OPEC Russia will join output cuts for the first time in 15 years to help the Organization of the Petroleum Exporting Countries prop up oil prices.

"OPEC has proved to the skeptics that it is not dead. The move will speed up market rebalancing and erosion of the global oil glut," said OPEC watcher Amrita Sen from consultancy Energy Aspects.

The cut did not come without a casualty, however. Indonesia, the producer group's only East Asian member, said it would suspend its membership after rejoining only this year as it was not willing to comply with the output cuts sought.

Following news of the deal, the price for Brent crude futures, the international benchmark for oil prices, surged to settle up nearly 9 percent. They eased slightly in early Asian trading on concerns that other producers, especially U.S. shale drillers, could fill any gap.

The agreement came despite huge political hurdles. Iran and Russia are effectively fighting two proxy wars against Saudi Arabia, in Yemen and Syria, and many skeptics had said the countries would struggle to find a compromise.

Saudi Energy Minister Khalid al-Falih said ahead of the meeting that the kingdom was prepared to accept "a big hit" on production to get a deal done.

"I think it is a good day for the oil markets, it is a good day for the industry and ... it should be a good day for the global economy. I think it will be a boost to global economic growth," he told reporters after the decision.   Continued...

 
OPEC President Qatar's Energy Minister Mohammed bin Saleh al-Sada and OPEC Secretary General Mohammad Barkindo address a news conference after a meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria, November 30, 2016. REUTERS/Heinz-Peter Bader