On Friday, OPEC and its allies led by Russia agreed to implement 1.2 million barrels per day (b/d) pumping cuts from January 2019 to shore up flagging oil markets and prevent supply glut. The result came as a relief to Saudi Arabia, which had strongly advocating cuts, but saw several OPEC members -- notably geopolitical rival Iran – demanding for exemptions that threatened to undermine the deal. The kingdom had to relent on exemptions for Iran, Libya and Venezuela. OPEC would cut 800,000 b/d under the deal, or 2.5% of production for each member, with the 10 non-OPEC partners slashing 400,000 b/d, or 2%.
The cuts -- using October as the baseline level, will last for six months, through the end of June. The 24-country OPEC/non-OPEC coalition will meet in Vienna again in April to assess the progress amid concern over the health of the global economy and the impact of trade wars on demand.
OPEC and its allies were forced into action by the slump in crude prices since October when Brent was trading at US$86 per barrel. The benchmark had fallen below US$60 a barrel this week before rebounding following the decision on Friday.
