Published: Mon, December 05, 2016
Economy | By Melissa Porter

Russian Oil Output Near Post-Soviet Record as It Prepares to Cut

"The market got all it could have hoped for from OPEC", said Michael Wittner, global head of oil research at Societe Generale.

The cut, representing about 1% of global production, will help to reduce a supply glut that has depressed prices for more than two years.

Brent for February settlement added as much as US$0.89, or 1.7 percent, to US$52.73 per barrel on the London-based ICE Futures Europe exchange.

Barriers to the cuts could come on multiple fronts-from members who fail to observer the cuts in the long- or near-term, from non-OPEC members who similarly increase output and from shale producers who flood the market. The data showed that US crude stockpiles unexpectedly fell by 884,000 million barrels in the week (ending November 25) compared to analysts' expectation of an increase of 636,000 barrels. After Opec announced its intention at September-end to cut production, crude oil prices had rallied. The action was highly anticipated and much-needed in and outside the oil sector.

Past experience shows Saudi Arabia and its allies have usually done nearly all the real cutting while other Opec and non-Opec members have been left to produce as much as they can.

Meanwhile, Brent crude, the global benchmark for oil, climbed to $50.47, Thursday morning, with West Texas Intermediate (WTI) was trading at $49.81 per barrel.

Despite the continual rise of oil prices and China's status as a major oil importer, Lin said the effect on the Chinese economy will be "limited".

Giving details of the agreement reached, the Ministry said that at the 171st meeting held in Vienna, OPEC reached a landmark deal that will effectively cut production by about 1.2 million barrels per day, or about 4.5 percent of current production, to 32.5 million barrels per day.

With the "will they" or "won't they" dilemma now past following the greenlighting of OPEC's proposal to cut production quota, it is time to keep a tab on some of the stocks that can benefit from this news that is bullish for prices and in turn the companies.

Saudi Arabia, which raised oil production to a record this year, is to reduce output by 486,000 barrels to 10.058 million per day, an OPEC document shows. Production was at 33.83 barrels during the third quarter.

"This agreement comes from a sense of responsibility from Opec member countries and non-Opec member countries for the general well-being and health of the world economy", Mr Al-Sada said. That should help push down unemployment further, pressure wages and fuel the US economic expansion.

The Federal Reserve Bank of Dallas recently surveyed producers and found that most believe crude must be $55 or higher before drilling picks up significantly, said Michael Plante, an economist for the bank. In particular, oil production from the seven shale regions - Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica - would likely drop by 20,000 barrels a day in December to 4.498 million barrels a day, the lowest level since April 2014.

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