US, Western Diplomats See Political Motive Behind OPEC Oil Cut

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The statement, which may have been written on Thursday, the day of the OPEC meeting, didn't specify the output cut by nonmembers, which include Russian Federation, but news reports have pegged the nonmember cuts at 400,000 barrels a day to bring the total reduction to 1.2 million barrels a day.

This is about 3% cut for OPEC and Russian Federation combined.

Concerns that oil producers wouldn't reach an agreement to aggressively reduce output had weighed on prices, but US government data revealing the first decline in domestic crude supplies in 11 weeks did offer a brief respite in prices from the session's lows on Thursday and contributed to Friday's early move.

Under the agreement, global crude oil output will be slashed by 1.2 million barrels per day (bpd) for the first six months of 2019.

One stumbling block to an agreement had been Iran, Saudi Arabia's regional rival and fellow OPEC member, which had been arguing for an exemption to any cuts because its crude exports are already being pinched already by US sanctions. "I know for a fact that oil and gas producers in the USA are probably breathing a sigh of relief that we're providing some certainty and visibility for 2019".

"President Trump will not be happy to see today's headlines, but how strongly he reacts depends mainly on whether crude prices rise strongly as a result in coming days and weeks", Bob McNally, president of US-based Rapidan Energy Group, told Reuters news agency.

On Wednesday, the USA leader tweeted he hoped OPEC would "be keeping oil flows as is, not restricted". United States oil prices ended Thursday lower, due to concern that planned OPEC production cuts will be smaller than originally anticipated.

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The 15-member OPEC agreed to cut a total of 800,000 barrels per day (about 2.5 per cent) from October 2018 levels, while their seven-member non-OPEC counterparts settled for a cut of 400,000 barrels per day (about 2.0 per cent).

U.S. crude prices have sagged nearly a third since hitting a four-year high near $76 a barrel in October.

Brent crude rose $1.61, or 2.7 percent, to settle at $61.67 a barrel. If the group's most important partner in the so-called OPEC+ alliance decides to make a sizable cut, the cartel would follow up. In November, shortly after he was criticized for not punishing Saudi Arabia for the murder of Washington Post columnist Jamal Khashoggi, Trump tweeted out his thanks to the Saudis for lower gas prices that were "l$3 ike a big Tax Cut for America and the World".

I'd still say that a deeper cut would be needed to really see oil rally back to $70. Iran, OPEC's third-largest producer, has considerably reduced its oil exports so far. "If they don't get rid of that oversupply, the market will drown in oil", said Antoine Halff of the Center on Global Energy Policy at Columbia University.

"U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the market", said Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher. "For most nations, self-interest ultimately prevails", she said.

Though al-Falih insisted that "we don't need permission from anyone to cut" production, the figure of a million barrels put forward by Saudi Arabia was lower than the reduction expected by the markets.