REVIEW - OPEC, Other Vienna Deal Participants Agree to Cut Oil Output by 1.2Mln Bpd in H1 2019
MOSCOW (Pakistan Point News / Sputnik - 08th December, 2018) Participants of the OPEC-non-OPEC oil output cut deal agreed on Friday to reduce overall production by 1.2 million barrels per day starting from next year, with a view to signing the charter on future long-term cooperation in the first quarter of 2019.
The decision was made in Vienna, which was hosting a series of high-level talks between the OPEC and non-OPEC oil producers this week. The meetings sought to determine the fate of the 2016 agreement on oil production curtailment.
At that time, the nations agreed to cut oil output by a total of 1.8 million barrels per day in an effort to stabilize global oil prices. Since then, the agreement has repeatedly been prolonged with the final extension reaching the end of 2018.
Under the new deal, OPEC and non-cartel nations agreed to cut oil production by 0.8 million barrels per day and 0.4 million barrels per day respectively from October 2018 levels. The deal would be valid from January 2019 for six months.
The next meeting of the OPEC-non-OPEC Joint Ministerial Monitoring Committee (JMMC) will take place in April, and will review the situation in the market.
The OPEC-non-OPEC talks were unfolding against an easy backdrop. In particular, Iranian Petroleum Minister Bijan Zangeneh stated on Wednesday that his country was not going to discuss oil production quotas, as long as US' reinstated sanctions against Tehran were in place.
Russian Energy Minister Alexander Novak confirmed that it had been harder for OPEC-non-OPEC to decide on further cooperation regarding oil production cuts than two years ago due to raging trade wars and new sanctions, among other reasons.
"It seems to me that it was even more difficult to assess the situation today than two years ago ... More uncertainties have emerged in these two years. We see that sanctions, which are being imposed by separate countries on certain states, are being expanded ... We see more and more that market methods are being replaced by non-market ones, there is more protectionism, and trade wars are expanding between the nations," he said at a press conference.
The OPEC-non-OPEC nations however reached a consensus, with exemptions from the deal granted to the sanctions-hit Iran and Venezuela, as well as conflict-torn Libya.
"Some countries with special circumstances will be given exemptions from the participation [in oil production cuts], which means the percentage that we will distribute among us [OPEC] in terms of a cut will be higher than the average for everyone. These countries are Iran and Venezuela because of the sanctions, and Libya because of the fact that they are unfortunately on and off [in terms of oil production] due to the situation in [the country]. These are the only three countries that have been given [exemptions]," UAE Energy Minister Suhail Mazrouei announced.
DEAL 'PROVIDES CERTAINTY' IN THE MARKET
Commenting on the results of the talks, all participants of the deal noted that it would much contribute to the stability in the oil market.
"It is obvious that today a very important and rational decision was made, a compromise decision on an additional reduction in the volume of production by OPEC and non-OPEC countries ... This should ensure, among other things, a better situation in balancing the market," Novak said at a news conference following the meeting.
Novak also said he was confident that all participants of the agreement would make every effort to fulfill new commitments to reduce oil production in 2019.
The minister also expressed hope that the deal would result in oil prices that would be "balanced for both consumers and producers, and create conditions for the development of the industry without causing overproduction on the market, and at the same time ensuring that there is no shortage."
Saudi Energy Minister Khalid Falih also commended the OPEC-non-OPEC deal for providing certainty with regard to the global oil market.
"Let's face it, the biggest oil and gas producer today is clearly the United States and it is not with us on the table. I am estimating and guessing that I know for a fact that oil and gas producers in the United States are probably breathing a sigh of relief that we are providing some certainty and feasibility for 2019 so they could approve their budgets," Falih said.
Following the marathon talks, the OPEC-non-OPEC nations announced that they plan to sign an agreement on future cooperation next year.
OPEC Secretary General Mohammad Sanusi Barkindo said that Saudi Arabia would host a summit between the OPEC and non-cartel producers next year to sign the much-anticipated agreement.
"We were able to reach a consensus within the OPEC-non-OPEC group to proceed with discussions on the Declaration of Cooperation and the charter that will further bind both groups into the medium and long-term [cooperation]. Ultimately in the new year we hope we will be able to make a major announcement that will culminate in a summit that the Kingdom of Saudi Arabia has kindly and generously accepted to host," Barkindo said.
UAE Energy Minister Suhail Mazrouei, in turn, said that he was hoping that Chad, Uzbekistan, South Africa, who were present at the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and non-cartel members of oil output cuts deal, would join the agreement soon.
Mazrouei stressed that the cooperation within the format had been "fruitful," with all participants benefiting from it, and expressed hope that "this cooperation continues not only for 2019, but for the years to come."