- 2nd December 2016
Oil prices rise and oil-producing nations agree to reduce output
Oil prices rose over 10% on Wednesday to over $50/barrel, with crude prices rising nearly 5%.
The Organisation of the Petroleum-Exporting Countries has agreed to cut production by 3%, in a bid to support prices. This drop will take production from 33.6m bpd to 32.5m bpd.
Saudi Arabia, OPEC’s de facto leader, will lead the cuts with the majority, dropping output by almost 500,000 bpd.
Iraq will reduce output by 200,000 bpd and non-OPEC member Russia will decrease their output by 300,000 bpd.
Contrastingly, Iran has actually been allowed to slightly boost their production, compared to October levels, after they long argued they need to regain the market share they lost under Western sanctions.
Kuwait, Venezuela and Algeria have agreed to monitor compliance with the OPEC agreement.
Oliver Sloup, director of managed futures at IITraders.com, has said “In the past, not all producers have complied with agreements on supply cuts. As a result, there is scepticism about how closely the production caps will be adhered to.”
U.S.-listed oil companies including Exxon Mobil Corp (XOM.N), Chevron Corp (CVX.N) and Schlumberger (SLB.N) saw shares rise as crude prices climbed.
The pact is seen as a boon for U.S. shale producers, who have developed techniques to pump crude at a price almost as low as that of Iran and Iraq.