Oil surges, retreats on possible OPEC cut
September 29, 2016, 7:42 am

Organization of Petroleum Producing Countries (OPEC) Secretary General Mohammad Sanusi Barkindo (R) and President of OPEC Mohammed Bin Saleh Al-Sada have called the production cut agreement “historic” [Xinhua]

Meeting on the sidelines of the 15th International Energy Forum in Algeirs, the Organization of Petroleum Exporting Countries (OPEC) agreed on Wednesday to reduce their oil output to 32.5 million barrels per day (bpd) from the current production levels of around 33.24 million bpd.

Oil prices reacted immediately to the first prospective production cut in eight years. International benchmark Brent Crude rose about six per cent in late trading Wednesday but retreated slightly in Asian trading by 0.76 per cent to $48.32 at press time.

US benchmark West Texas Intermediate also rose before scaling down by 0.40 per cent to $46.84 per cent.

This comes following a proposition by Algeria on Wednesday to cut the oil outputs of the group in order to regulate the slumping market, local media reported.

“OPEC made an exceptional decision today … After two and a half years, OPEC reached consensus to manage the market,” said Iranian Oil Minister Bijan Zanganeh.

The group will reportedly agree on concrete levels of production for each country at their next formal meeting in Vienna November.

But some analysts are warning that the cut may be token. Reducing daily output for all 14 members by a cumulative 750,000 to 900,000 barrels may be insufficient to return oil prices above the $60 bpd mark as some had predicted for 2017.

OPEC is already producing over its previously agreed level of 31.5 million bpd.

It is also unclear which countries would have to make the cut. Iran, for example, has insisted it will make no production cuts as it tries to revive its oil industry to pre-sanctions levels.

The BRICS Post with inputs from Agencies