The oil cartel Opec has agreed its first supply cut in eight years in order to boost the price of oil.
Mohammed Bin Saleh Al-Sada, Opec’s president, said a cut of 1.2 million barrels a day would start from January.
It comes after more than two years of depressed oil prices, which have more than halved since 2014, due to a supply glut on the market.
The price of Brent crude jumped 10% to $51.94 a barrel, and US crude rose 9% to $49.53. In addition to the production cut by Opec members, non-Opec countries will be expected to reduce production by 600,000 barrels a day, according to Mr Al-Sada.
He did not list which countries these might be, beyond saying Russia was prepared to cut 300,000 barrels from its output of more than 10 million barrels a day.
“This agreement comes from a sense of responsibility from Opec member countries and non-Opec member countries for the general well-being and health of the world economy,” he said.
The deal comes after oil ministers agreed to a cut in principle in September, which would have limited output by about 700,000 barrels a day while allowing Iran to increase production.
But disagreements between Saudi Arabia – the world’s biggest oil producer – and Iran led to doubts an agreement would be secured.
What and who is Opec?
- Formed in 1960, the Organization of the Petroleum Exporting Countries (Opec) coordinates the energy policies of member countries, who produce about a third of the world’s oil
- It says its goal is to ensure the stabilisation of oil markets, “in order to secure an efficient, economic and regular supply of petroleum
- to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry”.
- Its members include Algeria, Angola, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela.
- Indonesia agreed to suspend its membership today.
- A number of other major oil-producing nations such as the US and Russia are not Opec members.
The Saudis were hesitant to shoulder the lion’s share of a cut, while Iran had resisted reducing its own production, arguing it had yet to recover its output levels after years of sanctions. At Wednesday’s meeting, however, Saudi Arabia agreed to cut output by about 500,000 barrels per day – a total reduction of about 4.5%.
That will take its output to 10.06 million barrels per day.
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