OPEC Cuts Production: Everything You Need To Know
After months of negotiations and disputes, OPEC has reportedly agreed to its first crude oil production cut since 2008. At a meeting in Vienna, sources said OPEC has finalized a deal that is in line with a plan discussed in September to cut production from 33.6 million barrels per day (bpd) to between 32.5 million and 33.0 million.
On Wednesday morning, OPEC members were still trying to resolve a dispute concerning third-party estimates of Iraq’s production. However, Iraq now seems to be on board with the deal after the oil minister consulted with the prime minister on the terms.
Energy Intelligence Group’s Amena Bakr tweeted that Iran has agreed to freeze production at 3.975 million bpd. Reuters is reporting that Saudi Arabia will cut its production to 10.06 million bpd.
Sources are also reporting Indonesia’s OPEC membership has been suspended. Details of the suspension aren’t yet clear. Indonesia’s October oil output was 722,000 bpd. Its share will reportedly now be redistributed among other OPEC members.
According to Bakr, the deal will go into effect in January. It will initially last for six months but could be extended if oil prices remain depressed.
The meeting is now reportedly over, and OPEC representatives are expected to officially sign the deal after having lunch.
The oil market is certainly reacting positively to the OPEC news. The United States Oil Fund LP (ETF) (NYSE: USO) opened up more than 6.6 percent on Wednesday. The VanEck Vectors Oil Services ETF (NYSE: OIH) is up 6.5 percent. The Energy Select Sector SPDR (ETF) (NYSE: XLE) is up 4.0 percent. The SPDR S&P Oil & Gas Explore & Prod. (ETF) (NYSE: XOP) is up 7.5 percent.
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