Iran gave OPEC the green light on Friday to reduce oil output by around 0.8 million barrels per day from 2019 after finding a compromise with rival Saudi Arabia over a possible exemption from the cuts, an OPEC source said.
This is about 3% cut for OPEC and Russian Federation combined.
USA shale producers cheered OPEC's decision to trim output, a move that sent crude prices higher on Friday, closing at levels that oil executives said would keep their profits flowing.
The group's control over oil markets has been severely eroded by the rise of USA oil production, which has been able to hum along at prices below the levels preferred by countries like Saudi Arabia and Russian Federation (see related story).
"The OPEC+ cut is fuzzy on details and will likely result in less reduction than the headline figure of 1.2 million bpd", said Bob McNally, president of US -based Rapidan Energy Group. The U.S. gave some nations permission to continue buying Iranian oil, just as U.S. sanctions on Tehran's energy sector began in November.
Data released Friday from Baker Hughes BHGE, +0.88% also implied a decline in future output, with the number of active USA rigs drilling for oil down by 10 at 877 this week. Investors doubt OPEC+ will be able to agree on production cuts in 2019.
As of 1:15 p.m. EST (1815 GMT), U.S. West Texas Intermediate crude futures were down $1.80, or 3.4 percent, at $51.09 a barrel.
In order to put an end to crude oil prices, the organization of oil producing countries has agreed to cut the oil production.
The Trump administration has supported that transition by opening new public land to drilling and loosening restrictions on public and private oil and gas production, with "energy independence" as a frequent talking point.
The joint output reduction is seen as a deeper cut than expected, as the US wants OPEC to keep a relatively lower oil price. Moscow insists its cut should be gradual and reconsidered after the first quarter since the market may shift, the delegate said, asking not to be identified discussing private deliberations.
The oil market reacted negatively to OPEC's setback, with Brent crudesliding 2.4 percent to $60.06 a barrel in London on Thursday.
On 11 November, Saudi Arabia, the biggest oil producer in OPEC, announced that it would reduce its daily oil output by 500,000 barrels per day.
Trump was claiming to cut Iranian oil exports to zero and his best buddy bin Salman was Trump's main chess piece to succeed in his game against Iran.
Cailin Birch, EIU's global economist, said, "We expect oil demand growth to slow in the coming months compared with 2017-18, as the global economic cycle starts to turn".
Before Thursday's meeting, Al-Falih said that "if everybody is not willing to join and contribute equally, we will wait until they are" and he was prepared for the consequences of no deal.
"Even a 1 million bpd cut could lead to a "sell the news" reaction in the short term", Jefferies added. Just this year, the US has taken over as the world's largest producer of oil.
"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.
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