Crude oil benchmarks on the New York and London markets climbed by more than $1/bbl on Dec.7 after the Organization of Petroleum Exporting Countries and a group of 10 non-OPEC countries, led by Russia, agreed to cut production by a total 1.2 million b/d effective Jan. 1, 2019.
The cuts will be made using October 2018 production levels as a baseline (OGJ Online, Dec. 7, 2018). OPEC agreed to supply 800,000 b/d of the cuts with participating non-OPEC countries to contribute the rest. Russia said it would cut its production by 230,000 b/d.
Barclays Research said in a Dec. 7 research note that Saudi Arabia is expected to make most of the OPEC production adjustments. During a Dec. 7 news conference, OPEC officials also said Iran, Venezuela, and Libya would be exempted from the cuts.
OPEC announced the agreement to cut supply without making country-specific allocations. The cartel produced 32.9 million b/d in October.
The production cut was announced in efforts to support oil prices, which had fallen sharply on concerns about building world oil inventories. Barclays expects oil prices will rebound to the low-$70/bbl range for Brent next year.
Energy prices
The January light, sweet crude contract on the New York Mercantile Exchange rose $1.12 to close at $52.61/bbl. The February contract increased $1.11 to close at $52.81/bbl.
Natural gas futures for January rose $1.61 to close at a rounded $4.49/MMbtu on Dec. 7.
Ultralow-sulfur diesel for January gained nearly 3¢ to a rounded $1.89/gal. The NYMEX reformulated gasoline blendstock for January increased 5¢ to a rounded $1.48/gal.
Brent crude oil for February gained $1.61 to $61.67/bbl on London’s International Commodity Exchange. The March contract increased $1.52 to $61.85/bbl. The gas oil contract for December was $587.25/tonne, up $30.75.
OPEC’s basket of crudes for Dec. 7 averaged $59.20/bbl, up 41¢ from the previous day.
Contact Paula Dittrick at [email protected].
