OPEC Agreement to 'Reduce' Oil Production

Reuters has reported, citing some sources, that oil ministers from OPEC member countries reached an agreement on reducing oil production at their meeting on Thursday, December 6. The details of this agreement and the amount of reduction have not been disclosed, but according to Reuters, OPEC members are waiting to hear the views of the organization's allied countries, led by Russia, to reach a consensus on the exact amount of production cuts. Alexander Novak, the Russian energy minister, left the Vienna meeting on Thursday morning to consult with President Vladimir Putin in Moscow. He is expected to join the joint meeting of OPEC and allied countries on Friday. Oil prices have dropped by about one-third since early October, and U.S. President Donald Trump insists that OPEC should maintain high production levels to lower prices. Khalid al-Falih, the Saudi oil minister, whose country accounts for one-third of OPEC's production, expressed hope that an agreement on oil production cuts would be reached by the end of Friday. The Saudi minister told reporters, 'If a country does not want to reduce its production, we can give it the opportunity to achieve that capability.' Apparently, he was referring to Russia. Saudi Arabia is asking Russia to cut its production by 300,000 barrels per day, but Moscow says it can only agree to half of that in the short term. Nevertheless, the Saudi oil minister stated that the reduction could be around 500,000 to 1.5 million barrels, 'but one million would also be very good.' On Thursday, following reports about a potential reduction less than expected from OPEC and allied countries, oil prices fell by about 3% compared to the previous day. Brent crude oil was reported to be below $60 at the time of this report. Reuters quoted Greg Shearno, an oil market expert, stating that a one million barrel reduction, while 'disappointing many, would still have a significant impact on reducing excess oil production.' According to Reuters, OPEC members say that if Russia agrees to a daily reduction of 150,000 barrels, they are ready to collectively reduce their total production by one million barrels along with allied countries, and if Russia agrees to a reduction of 250,000 barrels, they will agree to a total reduction of 1.3 million barrels. However, the Russian energy minister stated on Wednesday that reducing oil production in winter is very difficult for his country due to cold weather. On the other hand, Bijan Namdar Zangeneh, Iran's oil minister, stated before the OPEC meeting that as long as Iran is facing sanctions, it will not participate in any agreement regarding oil production in OPEC. Zangeneh emphasized that Iran must be exempt from any decisions regarding production levels, stating that a suitable price for each barrel of oil is between $60 to $70. Iran's oil production and exports have decreased by one million barrels since May this year following the U.S. withdrawal from the JCPOA.