Opec countries agree first oil output cut in eight years

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Opec countries agree first oil output cut in eight years

Opec countries have agreed their first supply cut in eight years, sending the price of crude surging more than 8%.

Mohammed Bin Saleh Al-Sada, Opec”s president, said a cut of 1.2 million barrels a day would start from January.

That is about 3% of the group”s output and would bring total production to 32.5 million barrels per day.

The price of Brent crude jumped 8.4% to $51.3 a barrel, and US crude rose 8.2% to $48.9%. The price has plunged in the last two years from more than $100.

According Mr Al-Sada, key non-Opec countries were party to the deal and were tentatively planning to reduce their output.

He did not list those involved, but said Russia was prepared to cut 300,000 barrels from its output of more than 10 million barrels a day.

Seeking consensus

The deal comes after oil ministers agreed to a cut in principle in September, which would have limited output by about 700,000 barrels a day while allowing Iran to increase production.

But reported disagreements between Saudi Arabia – the world”s biggest oil producer – and Iran led to doubts an agreement would be secured.

The Saudis had been hesitant to shoulder the lion”s share of a cut, while Iran had resisted reducing its own production, arguing it had yet to recover its output levels after years of sanctions.

At Wednesday”s meeting, however, Saudi Arabia agreed to cut output by about 500,000 barrels per day – a total reduction of about 4.5%.

That would take its output to 10.06 million barrels per day.

The Reuters news agency also reported earlier that Opec had agreed to suspend Indonesia”s Opec membership, to allow Iran to set new production levels at 3.797 million barrels per day.

Ahead of Wednesday”s meeting, the Saudi energy minister, Khalid al-Falih, said there were “good chances” that a deal would be brokered.

However, he said Saudi Arabia would have to “take a big cut and a big hit” to current production – and its 2017 forecast – if Opec production were limited to 32.5 million barrels per day.

“So we will not do it unless we make sure that there is consensus,” he added.

He also said a production freeze in Iran at pre-sanctions levels would be “very considerate of other Opec members when they”re having to cut”.

“Iran has recovered to its pre-sanctions levels,” Mr Al-Falih said.