OPEC and non-OPEC oil producers on Saturday struck their first deal in a little over a decade to cut back oil output jointly and ease a global glut.
With the deal finally signed after almost a year of arguing within the Organization of the Petroleum Exporting Countries and mistrust in the willingness of non-OPEC Russia to play ball, the market’s focus will now switch to compliance with the agreement.
Russia, which 15 years ago failed to deliver on promises to cut in tandem with OPEC, is expected to perform real output reductions this time. But analysts question whether many other non-OPEC producers are attempting to present a natural decline in output as their contribution to the deal.
OPEC has a long history of cheating on output quotas. The fact that Nigeria and Libya were exempt from the deal due to production-denting civil strife will further pressure OPEC leader Saudi Arabia to shoulder the bulk of supply reductions.
“This agreement cements and prepares us for long-term cooperation,” Saudi Energy Minister Khalid al-Falih told reporters after the meeting, calling the deal “historic”.
Russian Energy Minister Alexander Novak told the same news conference: “Today’s deal will speed up the oil market stabilization, reduce volatility, attract new investments.”
Last week, OPEC agreed to slash output by 1.2 million barrels per day from Jan. 1, with top exporter Saudi Arabia cutting as much as 486,000 bpd.
On Saturday, producers from outside the 13-country group agreed to reduce output by 558,000 bpd, short of the initial target of 600,000 bpd, but still the largest contribution by non-OPEC ever. Of that, Russia will cut 300,000 bpd.