The energy ministers of Qatar and Nigeria announced this decision after an informal meeting of the group in Algiers. The OPEC agrees to cut oil production. Its members have reached an agreement on Wednesday evening to limit but not freeze oil production. In effect, the agreement was to cap total members production to something between 32.5 and 33 million barrels per day. The deal which is the first in eight years is expected to come into force in November. Meanwhile, the 15th International Energy Forum (IEF15) did take place in Algiers as scheduled on from 26-28 September 2016, hosted by the Algerian Government in the newly completed Center for International Congress of the ‘Club des Pins’ of Algiers, gathering Ministers, senior officials, CEOs, International Organisations, and experts from the 72 member countries of the IEF. Sadly, it did not come to any conclusive new arrangement between the producers and consumers.
Dow Jones Business News on Nasdaq reported in the evening of September 28, 2016th, in an article of Jenny W. Hsu who elaborating on Crude oil prices rising in early Asia trade this Thursday after the Organization of the Petroleum Exporting Countries after informally meeting in Algiers, surprised the market by agreeing to a framework to cut production.
The group proposed cutting its collective output to between 32.5 million barrels a day and 33 million barrels a day, down from the levels of 33.2 million barrels a day in August, national oil ministers said. This is the first time the group has agreed to cut production since 2008 . . . The move is a turnaround from the cartel’s “market-share first” tactic, signalling that perhaps even large producers are feeling the pain of prolonged low prices . . . Prices had surged over 5% overnight to their biggest gains in five months, following news that the 14-member bloc had agreed Wednesday that a production cut is necessary to buoy oil prices, which has been weighed down by a persistent glut. The group will wait until November 30 to finalize the decision.
Efforts to freeze or cut production since oil prices started falling in mid-2014 had failed so far. Talks in April this year in Doha, Qatar, broke down when Iran refused to participate. Apart from
“This should remove the systematic risks in the global banking system with leveraged loans to oil exporting countries and upstream oil producers,” said Gordon Kwan, the head of oil and gas research at Nomura. The move will also eliminate risk of further devaluation of the Middle East.
However, the minor gains seen in the Asia session reflect the intense skepticism in the market on OPEC’s commitment in actually implementing the plan.
Goldman Sachs noted that pushing up the prices via a production cut among the low-cost producer is “self-defeating” because it would provide more premium for oil drillers around the world to return to the oil patches. Moreover, it would leave the low-cost producers with only one choice to increase revenue: volume growth.
“The jury is still out whether OPEC will take any real actions,” said Ben Le Brun, an analyst with OptionsXpress, saying the global oil markets will face a high degree of uncertainty leading up to the late November meeting as OPEC members will battle over who will be exempt from the deal and who should take a steeper cut.
For example, Iran, Libya, Nigeria may fight to postpone cutting their production until their output resumes their peak level.
“In any case, this is still kicking the can down the road to the formal OPEC meeting on November 30, where individual country quotas might be decided,” said Citi Research in a note.
Nymex reformulated gasoline blendstock for October–the benchmark gasoline contract–rose 60 points to $1.4837 a gallon, while October diesel traded at $1.4960, 50 points higher.
ICE gasoil for October changed hands at $436.75 a metric ton, up $20.75 from Wednesday’s settlement.
Benoit Faucon, Georgi Kantchev, and Selina Williams in Algiers contributed to this article.
Write to Jenny W. Hsu at email@example.com
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