NEW YORK (Reuters) – Oil prices jumped more than 4 percent on Friday as Saudi Arabia and other producers in OPEC, as well as allies like Russia agreed to reduce output to drain global fuel inventories and support the market. The Organisation of the Petroleum Exporting Countries and its Russia-led allies, referred to as “OPEC+,” agreed to slash production by a combined 1.2 million barrels per day from 2019, larger than the minimum 1 million bpd that the market had expected, despite pressure from U.S. President Donald Trump to reduce the price of crude. The producer club will curb output by 800,000 bpd from January while non-OPEC allies contribute an additional 400,000 bpd of cuts, Iraqi Oil Minister Thamer Ghadhban said after OPEC concluded two days of talks in Vienna. Russian Energy Minister Alexander Novak confirmed the combined output cuts of 1.2 million bpd, saying that the market will be oversupplied through the first half of the year.
A 1.2 million-bpd cut, if implemented fully, “should be enough to largely attenuate, but not eliminate, expected implied global inventory builds in the first half of next year,” said
Harry Tchilinguirian, global oil strategist at BNP Paribas in London told the Reuters Global Oil Forum. Oil prices have plunged 30 percent since October as supply has surged and global demand growth has weakened. Prices fell almost 3 percent on Thursday after OPEC ended a meeting in Vienna with only a tentative deal to tackle weak prices. Talks with other producers were held on Friday. But Iran gave OPEC the green light on Friday to reduce oil output after finding a compromise with rival Saudi Arabia over a possible exemption from the cuts, an OPEC source said. Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by 3.3 million bpd since the end of 2017 to 56.38 million bpd, meeting almost 60 percent of global consumption. The surge is mainly due to soaring U.S. oil production C-OUT-T-EIA, which has jumped by 2.5 million bpd since early 2016 to a record 11.7 million bpd, making the United States the world’s biggest producer. Trump has asked OPEC to keep prices low, pleading with the Saudis in twitter messages. Russia had initially balked at cutting production alongside OPEC.