Nigeria, Iran and Libya got special concessions Wednesday, as the Organisation of Petroleum Exporting Countries, OPEC, reached the much-sought consensus to cut oil production by 1.2 million barrels per day, effective January 1, 2017.
The cut, which is the first after eight previous attempts since 2008, is considered a massive boost to efforts by the global oil cartel to shore up oil prices and end a record glut that has paralyzed economies.
It is also seen as a major achievement by OPEC’s Secretary General, Nigeria’s Mohammad Barkindo, whose diplomatic shuttles since assumption of office in August, led to the “Algiers Accord” that sought to stabilize the market and boost price.
OPEC President, Mohammed Al-Sada, who announced the resolution on Wednesday at the end of the body’s 171st meeting in Vienna, Austria, said the adjustment in output would be shared among all members of the group, to bring their ceiling to 52.5 million barrels per day.
The cut is subject to a review after six months, with a possible rollover for another six months on the recommendation of a ministerial monitoring committee of three OPEC counties, namely Kuwait, Venezuela and Algeria. The countries are to closely monitor the implementation and compliance with the agreement.
Mr. Al-Sada, who is also Qatar’s Minister of Energy and Industry, said the latest output cut was subject to another 600,000 barrels expected to be cut by non-OPEC oil producers who have agreed to support the effort to re-balance the market and restore stability.
The OPEC president said the Russian Federation has agreed to take responsibility for about 300,000 barrels per day out of the non-OPEC volume, with final decision expected during a December 9 meeting in Dorha.
The 1.2 million BPD cut followed an agreement by members to implement a deal proposed during the last September meeting in Algiers to reduce crude oil production by at least one million barrels by November.
During the September resolution, three countries, namely Nigeria, Iran and Libya were proposed as candidates for exemptions in consideration of their peculiar circumstances.
Nigeria was recommended for exemption to enable it recover from the negative impact of incessant attacks on its oil facilities by armed militant groups in the Niger Delta region, which resulted in a massive cut in its production and exports capacities.
Libya was equally proposed for special consideration on similar grounds, following series of attacks on its oil facilities by terrorists groups operating in that region in recent months.
But, Iran was to be excluded to allow the country settle down and recover, after serving years of U.S.-imposed sanctions, including restrictions on its oil production and exports.
Although details of each country’s output adjustments were yet to be released by the OPEC secretariat, Mr. Al-Sada said Saudi Arabia, the group’s biggest producer, agreed to the biggest slice of about 486,000 BPD.
At the opening session, OPEC President, Mohammed Al-Sada, said the current situation in the global oil market required urgency in “bringing forward the re-balancing of the fundamentals and returning sustainable stability to the market.”
He said members considered all factors and processes in arriving at the decision, which he said would ultimately help revive the industry and boost reinvestment efforts to raise oil production capacity to secure the mid to long term security of supply
“We knew re-balancing the market will need courageous decisions from OPEC, with the support of some key non-OPEC countries. We agreed to share the reduction among OPEC countries, taking into consideration that some countries needed to be given special considerations because of their peculiar circumstances,” he explained.
The monitoring committee is expected to submit a report to the next meeting of the group scheduled for May 25, 2017.
“This a major step forward to re-balance the market and reduce the stock overhang, will be fair to both consumers and suppliers and ensure that the economy is moved to a healthier level of inflation and growth,” Mr. Al-Sada said.
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