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OPEC+ will adjust its output target and redistribute production cuts between its members under pressure from Saudi Arabia, which has long carried an outsized share of the burden.
The group, which pumps more than half the world’s oil, agreed in Vienna on Friday to reduce its output target by 500,000 barrels a day, said delegates, bringing it in line with recent production levels.
Under the new deal, the size of the OPEC+ daily production cuts target will be increased from 1.2 million barrels to 1.7 million barrels, compared to a baseline of October 2018, according to ministers, including Russia’s Alexander Novak and Iran’s Bijan Namdar Zanganeh. That doesn’t require the group as a whole to pump less oil, since it was already implementing an additional cut of that size in October 2019. The new 500,000-barrel-a-day quota reduction will only apply in the first quarter of 2020, said Novak. The group will hold an extraordinary meeting in March to discuss what to do next, said a delegate.
Saudi Energy Minister Abdulaziz bin Salman gave a clear signal before the meeting that his priority was to get some members to stop ‘cheating’ and implement the cuts they have promised. Abdulaziz said: “The market will have to trust us. The analysts will have to believe us. And, if they don’t, we cannot deliver what we want to achieve, adding, “It is as simple as that, and sometimes it is as tough as that.”
After days of rumours and mixed messages that whipsawed prices, the shape of the adjusted deal between the OPEC and its allies gradually emerged. Oil futures fell in New York on Friday as it became clearer that the group wasn’t planning to remove any additional barrels from the market.
Instead, delegates said it would rejig its deal to formalise the extra supply reductions some of its members, notably Saudi Arabia, have already been making. Then it would share them out more equitably among the countries that have consistently failed to meet their targets. Saudi Arabia will continue to pump at current levels under the new agreement, said the delegates.
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