VIENNA – OPEC and Russia agreed to an agreement on Friday to reach a significant production cut that would absorb a burgeoning global oil supply glut.
Organization of oil exporting countries will dampen along with Russia and its allies Oil production amounted to 1.2 million barrels a day. The deal is still under negotiation. The OPEC countries would cut 800,000 barrels, and the group led by Russia would handle the rest.
Brent crude oil rose 5.2% on the London Intercontinental Exchange to $ 63.1
resources: Renaissance Capital (Russia)); ERC Equipoise (Venezuela, Nigeria, Angola, Ecuador); International Monetary Fund (all others)
The talks had a drag on earlier this week, as Saudi Arabia and Russia disagreed sharing the pain of the cuts to halt a 30% drop in oil prices. Russia's influence over the cartel decisions indicated that Saudi Arabia was no longer in control of the group, the delegates said. Although Russia is not a member of OPEC, the Saudis insisted that Moscow had recently convened for meetings.
The negotiations took place amid the crisis in the almost 60-year-old organization. Some smaller oil-producing nations are worried that their votes have dropped in two years since the cartel entered into an alliance with Russia.
The cartel has difficulty convincing the markets that it can stabilize oil prices. Sarah Kent of WSJ takes a look at the current state of OPEC power.
Some OPEC members also say the Saudis are too committed to US President Donald Trump. Saudi Arabia has commissioned a study to examine what the world could look like without the cartel. Qatar said it broke the connection to the group.
"OPEC, or more precisely Saudi Arabia, has been the main argument of the oil world for almost six decades. These days, however, it seems impossible to make a decision without the blessing of Russia, let alone risk the wrath of the US president, "said Stephen Brennock, brokerage analyst PVM Oil Associates Ltd.
But Saudi Arabia also wants to be cautious, fearing that it might annoy the allied US President Donald Trump.
The White House has said it would assist the kingdom despite the assassination of a renegade journalist by Saudi activists, but he urges Riyad not to push oil prices up.
"The rise of US energy dominance is just beginning and there is not enough cohesion in OPEC to fight it in the long run," said oil analyst Petromatrix, Olivier Jakob, in a note Friday.
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