Opec and its allies have agreed to cut an extra 500,000 barrels of oil a day from the global oil market next year to help prop up oil market prices amid fears of an economic slowdown.
The oil alliance agreed at a meeting in Vienna to deepen its production cuts after reigning in output for the last three years to prevent an oversupply of crude from dragging down oil prices.
The 14-strong cartel and its allies have agreed to toughen their target next year from a cut of 1.2m barrels a day below the group’s production rate in October 2018, to 1.7m.
The pact spurred a rapid oil price rise from lows of $62.80 a barrel in the early afternoon to more than $64.50 a little over an hour later. The price is well above the lows of $50.57 a barrel last December, but below the highs of $74.94 a barrel in April this year.
Opec members are expected to bear the brunt of the cut, by reducing production by 340,000 barrels a day, while its allies – led by Russia – will make up the balance.
A flood of new oil production is expected next year, far outpacing the sluggish growth in demand for oil.
Opec has been cutting output since oil prices plummeted to 13-year lows in early 2016. Manuel Salvador Quevedo Fernández, the president of Opec and Venezuela’s oil minister, said the market was in “a perilous condition” in 2016 and still remains at risk.
“We have been on a long and eventful journey since those dark days,” he said. “However, we continue to face various challenges and critical uncertainties that are beyond the capacity of any one stakeholder to influence. There have been trade-related issues, geopolitics and disruptions to security of supply.”
Saudi Arabia is expected to shoulder the bulk of the responsibility for reigning in Opec oil output, but the Saudi energy minister, Prince Abdulaziz bin Salman, urged Opec’s members and allies to exercise stricter compliance with .
The Saudi prince told delegates in Vienna that the oil cartel is “like a religion”.
He said: “If you are a believer you have to practice. Without practice you are an unbeliever. I do not assume that anyone here in this room is an unbeliever, but I would reiterate to our friends that further commitment and further conformity would allow us all the benefit.”
He added: “The market will have to trust us.”