OPEC Production Deal Keeps Global Oil Prices Buoyant
November 30 2016 - 10:11PM
Dow Jones News
By Jenny W. Hsu
Global oil prices continued to rise in early Asia trade on
Thursday after the Organization of the Petroleum Exporting
Countries agreed to cut production by 1.2 million barrels.
The decision, which marks the group's first concerted effort to
slash output since 2008, upended many analysts' expectations and
sent prices soaring by more than 9% overnight.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in January recently traded at $49.47 a barrel, up
$0.03 in the Globex electronic session. February Brent crude on
London's ICE Futures exchange rose $0.05 to $51.89 a barrel, the
highest level in more than a month.
Asia-Pacific energy stocks rose following the production deal.
Woodside Petroleum Ltd. was 6% higher and Oil Search Ltd. rose
9.6%.
The OPEC cut represents about 1% of global production, which
will help to reduce a supply glut that has depressed prices for
more than two years. The promised cuts include significant
reductions by heavyweights including Saudi Arabia, the group's most
powerful member and de facto leader.
Analysts say the biggest question remains enforcement, as OPEC
has no authority to make its members to comply. OPEC members have a
record of cheating by producing beyond their allotted quotas.
"People are going to be watching closely if the group can now
actually live up their pledges," says Stuart Ive, a client manager
at OM Financial.
Under the pact, Saudi Arabia is expected to take the lion's
share of the cuts by slashing production by 486,000 barrels a day.
Iraq agreeing to curb output by 20,000 barrels a day. Meanwhile,
struggling producers such as Iran, Nigeria, and Libya were exempt
from the deal, as their production has been hampered by sanctions
and militant attacks.
The group is expected to reassess the effectiveness of the deal,
which will take effect in January, in six months.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
November 30, 2016 21:56 ET (02:56 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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