AFP, Singapore :
OPEC shocked markets with a deal to cut oil output after kingpin Saudi Arabia allowed bitter rival Iran to be exempted, but analysts warned Thursday the move would not likely have a lasting impact. The cartel’s announcement of the first reduction in eight years sent crude prices surging up to six percent Wednesday, while energy firms in the US and Asia followed suit with huge gains.
At the end of six hours of negotiations and weeks of horse trading, OPEC announced the plan to cut production to 32.5-33 million barrels per day from the 33.47 million in August, the International Energy Agency said. The deal, in Algiers during an informal meeting with Russia, was hammered out after the group’s biggest producer Saudi Arabia agreed Iran, which is ramping up output after years of Western economic sanctions, would be exempted from the cut.
A Saudi-led effort to freeze output collapsed in April after Iran refused to participate in a reduction.
“It is Saudi Arabia who has clearly blinked first, allowing Iran, its main rival, to ramp up production,” said Jeffrey Halley, senior market analyst at OANDA.
“We shouldn’t underestimate the major shift by Saudi Arabia,” he told AFP. “These two don’t see eye to eye on anything so this is a huge concession by Saudi Arabia to ‘lubricate’ the process.”
OPEC shocked markets with a deal to cut oil output after kingpin Saudi Arabia allowed bitter rival Iran to be exempted, but analysts warned Thursday the move would not likely have a lasting impact. The cartel’s announcement of the first reduction in eight years sent crude prices surging up to six percent Wednesday, while energy firms in the US and Asia followed suit with huge gains.
At the end of six hours of negotiations and weeks of horse trading, OPEC announced the plan to cut production to 32.5-33 million barrels per day from the 33.47 million in August, the International Energy Agency said. The deal, in Algiers during an informal meeting with Russia, was hammered out after the group’s biggest producer Saudi Arabia agreed Iran, which is ramping up output after years of Western economic sanctions, would be exempted from the cut.
A Saudi-led effort to freeze output collapsed in April after Iran refused to participate in a reduction.
“It is Saudi Arabia who has clearly blinked first, allowing Iran, its main rival, to ramp up production,” said Jeffrey Halley, senior market analyst at OANDA.
“We shouldn’t underestimate the major shift by Saudi Arabia,” he told AFP. “These two don’t see eye to eye on anything so this is a huge concession by Saudi Arabia to ‘lubricate’ the process.”
