OPEC and its Russia-led allies agreed on Friday to slash oil production by more than the market had expected despite pressure from U.S. President Donald Trump to reduce the price of crude.Succeeding in a "most difficult" situation," Saudi Arabia got its brethren within OPEC and non-member allies led by Russia to agree to a production cut of 1.2 million barrels per day that the market rewarded on Friday with the best weekly gain in 10 for oil.
Brent oil , the global benchmark for crude, was up by $1.48, or 2.5%, at $61.54, after racing to $63.70 earlier.Many had expected the Saudis to play ball with the president, who had been protecting Riyadh from the threat of U.S. sanctions after the murder of the journalist Jamal Khashoggi, whom the CIA believes was killed at the urging of Saudi Crown Price Mohammed bin Salman.
At settlement, U.S. West Texas Intermediate crude was up $1.64, or 2.2%, at $52.61 per barrel. For the week, it gained 3.3%, the biggest advance since the week ended Sept. 23. Saudi Energy Minister Khalid al-Falih received praise from his Russian counterpart Alexander Novak for being able "to find a solution in the most difficult situation".
WTI initially hit $54.22 after Iraqi Oil Minister Thamer Ghadhban announced an 800,000 bpd cut by OPEC and a 400,000 bpd reduction by the group's allies over a six-month timeline. Cut exemptions were granted to OPEC's most economically depressed members Venezuela and Libya, as well as Iran, which is facing U.S. sanctions on its oil exports.
Despite the rebound, WTI still remained some 30% lower than the four-year highs of nearly $77 per barrel hit in early October. Brent was off about 27% from similar peaks achieved two months back.
Analysts said any price rebound here on will not be straight-lined, but dependent on whether the producers in Friday's deal do as pledged and not cheat by producing more. OPEC also interestingly didn't make public any country quotas this time for production, although Russia pledged to reduce between 228,000 and 230,000 bpd.
The United States is already the world's largest oil driller, with output that is expected to reach 12 million bpd in 2019, well above Saudi and Russia, the second- and third-largest producers, respectively, with production of just under 11 million barrels. The number of active U.S. rigs drilling for oil fell by 10 to 877 this week, data showed, but analysts said the number could jump again as prices rally.
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