UPDATE 10-Oil prices surge 4 pct on OPEC-led output cuts of 1.2 mln bpdReuters | Updated: 07-12-2018 22:21 IST | Created: 07-12-2018 22:21 IST
The Organization of the Petroleum Exporting Countries and its Russia-led allies, referred to as "OPEC+," agreed to slash production by a combined 1.2 million barrels per day from 2019, larger than the minimum 1 million bpd that the market had expected, despite pressure from U.S. President Donald Trump to reduce the price of crude.
The producer club will curb output by 800,000 bpd from January while non-OPEC allies contribute an additional 400,000 bpd of cuts, Iraqi Oil Minister Thamer Ghadhban said after OPEC concluded two days of talks in Vienna.
Brent crude rose $2.94 to $63.00 a barrel by 11:20 a.m. EDT (1620 GMT). In early trade, the global benchmark fell below $60 when it looked as if oil exporters might leave production targets unchanged. The benchmark rallied to a session high of $63.73 on news of the agreement.
U.S. crude rose $2.20 to $53.69 a barrel, after earlier reaching a session high of $54.22.
A 1.2 million-bpd cut, if implemented fully, "should be enough to largely attenuate, but not eliminate, expected implied global inventory builds in the first half of next year,” said Harry Tchilinguirian, global oil strategist at BNP Paribas in London told the Reuters Global Oil Forum.
Prices fell almost 3 percent on Thursday after OPEC ended a meeting in Vienna with only a tentative deal to tackle weak prices. Talks with other producers were held on Friday.
But Iran gave OPEC the green light on Friday to reduce oil output after finding a compromise with rival Saudi Arabia over a possible exemption from the cuts, an OPEC source said.
Oil output from the world's biggest producers - OPEC, Russia
and the United States - has increased by 3.3 million bpd since
the end of 2017 to 56.38 million bpd, meeting almost 60 percent
of global consumption.
The U.S. rig count, an indicator of future output, has risen for five straight months, The latest weekly data is due at 1 p.m. EST..
Given supply that is coming to be online, some analysts and market participants say the cut may not be enough to end oil's rout.
“Relative to how big this looming supply tsunami, it is not nearly enough to prevent big inventory builds next year,” said Robert McNally, president of Rapidan Energy Group in Washington. “President Trump and President Putin prevented OPEC+ from cutting by more, which was certainly needed to put a sturdy floor under prices. They are putting a fuzzy floor under prices.”
Trump has asked OPEC to keep prices low, pleading with the Saudis in twitter messages. Russia had initially balked at cutting production alongside OPEC.
(Reporting by Julia Payne and Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and David Evans)