Opec defies Trump with production cut

December 13 04:29 2018

At the meeting that was held in Vienna last Friday, the members of the Organisation of the Petroleum Exporting Countries (Opec) and its allies including Russian Federation committed to lessening their oil production by a higher-than-expected 1.2m barrels per day.

He said the OPEC members are planned to cut their output by 800,000 barrels and non-OPEC members by 400,000 barrels, noting that it will take effect as of January 1, 2019.

The Hook meeting, just 24 hours before OPEC was scheduled to meet, threatened to scuttle an agreement, said Helima Croft, commodities strategist at RBC Capital Markets LLC and a former Central Intelligence Agency analyst.

On paper, the shift to net oil exports means that the U.S.is today energy independent, achieving a rhetorical aspiration for generations of American politicians, from Jimmy Carter to George W. Bush.

OPEC’s decision will, however, not affect Iran, Venezuela and Libya, which were granted exemptions due to their current peculiar economic circumstances. Iran, under pressure from sanctions, won an exemption from the cut. In 2014, OPEC elected to pursue a policy of market share rather than output cuts, which led to a collapse in oil prices; in 2016, in coordination with several non-OPEC producers, the cartel reversed course and cut output, spurring a gradual doubling of prices.

Although Trump has been critical of OPEC for years whenever oil prices were high, he recently affirmed his support of Saudi Arabia despite the kingdom’s admission it murdered journalist Jamal Khashoggi.

It is believed that Russian Federation, a non-OPEC member was behind the deal as the country had many bilateral meetings with OPEC members.

They argue Riyadh’s determination to force through a larger-than-expected cut was partly a warning shot in line with thinly veiled threats by Saudi officials to jolt the global economy, if the USA moves to impose sanctions on the kingdom for Khashoggi’s brazen killing.

By agreeing on a level of cuts which was even deeper than expected, once again OPEC succeeded to surprise the market, a decision that definitely is not going to please the third musketeer which is probably already preparing his next tweet cascade. The reduction was larger than the 1 million bpd cut that analysts had expected.

The price of crude has fallen nearly a third since October to around $60 a barrel as Saudi Arabia, Russia and the United Arab Emirates raised output to offset lower exports from Iran, OPEC’s third-largest producer.

Last year, the US imported almost 20 percent of its petroleum supply, or about 3.8 million barrels per day of products, EIA data show, while earlier last month net imports hovered between 1.4 million and 2.6 million barrels per day.

The Trump administration reimposed wide-reaching economic sanctions on Iran’s critical oil industry in November, as well as other sectors of the Iranian economy, including major banks and shipping operations.

Oil prices have fallen from a four-year high above $86 a barrel in early October on concerns over excess supply.

“Low prices are actually not good for the USA economy, ” Al-Falih said, a riposte to Trump’s repeated calls for OPEC to open the taps.

The EIA’s short-term energy outlook issued Tuesday forecast an average 2018 WTI price of $65.18 a barrel, down 2.4% from the November report’s forecast.

On the other hand, China, India, South Korea and Japan bewildered after being forced to cut their Iranian oil imports temporarily halted their oil imports while trying their best to convince the USA for granting them waivers over Iran sanctions.

The headquarters of the OPEC cartel is in Vienna

Opec defies Trump with production cut
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