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Crude oil prices rise as OPEC plans output cut


OPEC President, Dr Mohammed Bin Saleh Al-Sada. PHOTO:

OPEC President, Dr Mohammed Bin Saleh Al-Sada. PHOTO:

Crude oil prices moved up by six per cent yesterday following the decision by the Organisation of Petroleum Exporting Countries (OPEC) to cut production in an attempt to curtail glut.

Specifically, Brent crude oil traded for $49.34 per barrel while West Texas Intermediate (WTI) rose to $47.89 a barrel.This is a significant improvement from the $40 per barrel, for which it was sold a few weeks ago due to persistent global glut.

OPEC members had said after a series of deliberations in Algiers, Algeria on Wednesday, they were looking at the possibility of reducing crude oil production. But members would have to wait till November to finalise on the quantity of reduction that is suitable for each country.

The cartel, giving a summary of its decision at the meeting on its website yesterday, stated that members opted for production target ranging between 32.5 and 33.0 mbpd, to accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward.

It stated: “In the last two years, the global oil market has witnessed many challenges, originating mainly from the supply side. “As a result, prices have more than halved, while volatility has increased. Oil-exporting countries’ and oil companies’ revenues have dramatically declined, putting strains on their fiscal position and hindering their economic growth. The oil industry faced deep cuts in investment and massive layoffs, leading to a potential risk that oil supply may not meet demand in the future, with a detrimental effect on security of supply.

“The conference took into account current market conditions and immediate prospects and concluded that it is not advisable to ignore the potential risk that the present stock overhang may continue to weigh negatively well into the future, with a worsening impact on producers, consumers and the industry.

“Based on the above observations and analysis, OPEC member countries have decided to conduct a serious and constructive dialogue with non-member producing countries, with the objective to stabilise the oil market and avoid the adverse impacts in the short- and medium-term.”

At the conference, OPEC President, Dr. Mohammed Bin Saleh Al-Sada, said the oil market had changed since June, thus the need to change the cartel’s expectation of rebalancing the market.

According to OPEC Secretary-General, Mohammad Sanusi Barkindo, the current cycle is supply-driven with most of the supply increases in recent years coming from generally high-cost non-OPEC production.

He noted that between 2008 and 2015, non-OPEC liquids supply growth was 7.9 million barrels a day, while OPEC liquids production was 1.5 million barrels a day during the same period.

Barkindo emphasised the need to bring together all industry stakeholders, to help develop cooperative and coordinated approaches to the often-complex challenges, as well as the multitude of uncertainties OPEC is facing in achieving market stability in the short-, medium- and long-terms.

“Market stability and sustainable energy development go hand-in-hand with open dialogue and action-oriented cooperation to evolve inclusive solutions”, he said.

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