Historical agreement OPEC/non-OPEC to cut oil production

Eleven more oil producing nations have agreed to cut their production to try to boost global crude oil prices. The deal follows an announcement by OPEC 11 days ago that its members would collectively cut production by just over 1 million barrels a day.

Large oil exporters, including Russia and Mexico, said they would mimic the Opec protocol agreed at the end of November and adjust their own production to 300,000 and 100,000 barrels a day respectively from the start of 2017. Oil prices have languished at less than or around $50 a barrel since the US became largely self-sufficient on shale from 2014 onwards; but with Opec’s announcement that production would be cut on 30 November, prices recently surged more than 15 per cent, rising last week briefly above $55. 

The OPEC and non-OPEC pact encompasses countries that pump 60 percent of the world’s oil, but excludes major producers such as the U.S., China, Canada, Norway and Brazil.

“The deal speaks volumes about the Saudi commitment to rebalance the market,” said Yasser Elguindi, a veteran OPEC watcher with consultant Medley Global Advisors. “Noone is talking any more about $30 a barrel oil.”

Saudi Arabia has long insisted that any reductions from the group should be accompanied by action from other suppliers. OPEC two weeks ago agreed to reduce its own production by 1.2 million barrels a day. Al Falih and his Russian counterpart Alexander Novak revealed they have been working for nearly a year on the agreement, meeting multiple times in secret.

“This is truly a historic event,” said Novak. “It’s the first time so many oil countries from different parts of the world gathered in one room to accomplish what we have done,” he added, speaking alongside Al-Falih.