Russia & OPEC agree on new oil production cuts to prop up global crude prices

The Organization of the Petroleum Exporting Countries (OPEC) and allied oil exporters led by Russia have agreed to deepen production cuts and to reduce daily output by 500,000 barrels during their meeting in Vienna.

OPEC and other major oil producers, referred to as OPEC+, met on Friday to decide if the current cuts of 1.2 million barrels per day (bpd) are enough to boost the market.

Under the new deal the size of collective daily production cuts is set to be deepened to 1.7 million barrels. OPEC states are likely to cover 372,000 bpd or around 75 percent of fresh curbs and allied non-OPEC producers an extra 131,000 bpd.

Russian Energy Minister Alexander Novak says the additional curbs will be come in force on January 1 and will be in force through the first quarter of 2020. Under the terms of the Vienna agreement, Russia will increase daily production cuts by 72,000 barrels.

“Russia’s share of overall production cuts in the first quarter [of 2020] will be 300,000 barrels per day,” Novak said.

Riaydh says it will cut its daily output by an additional 167,000 barrels. Venezuela, which is currently under harsh US sanctions, has been exempted of OPEC+ curbs, the country’s minister said at a news conference.

When OPEC held a smaller meeting on Thursday, the organization’s de facto leader, Saudi Arabia, called on more radical production cuts. The kingdom also reportedly threatened to boost oil production unilaterally if other signatories of the deal failed to adhere to the agreement.

Both global benchmarks Brent and WTI were down on Friday despite posting gains a day earlier. Brent was trading at $63.15 a barrel at 13:40pm GMT, while West Texas Intermediate fell to $58.00.