Updated: March 1, 2021
A deal has been reached after a stalemate. On Friday, OPEC and a coalition of oil producers led by Russia agreed to cut oil production by 1.2 million barrels a day to bolster prices that have been consistently falling in recent months.
After the announcement, Brent crude jumped 5.2% to $63.11 a barrel on London’s Intercontinental Exchange.
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OPEC nations agreed to cut oil production by 800,000 barrels a day and the Russia-led group would reduce theirs by 230,000 barrels a day, slightly less than Saudi Arabia, which will reduce its production by 250,000 barrels a day.
Nigeria and Libya, two countries in West and North Africa, as well as Iran and Venezuela, who pleaded with OPEC for special exceptions, as the world’s biggest oil suppliers were struggling to reach a deal on Thursday, have been granted their wishes, The Wall Street Journal reported on Friday.
Oil prices have crashed in recent months due to excess production and many have called on OPEC and others to reduce production to increase prices.
But Nigeria, for instance, is holding a presidential election in three months, and its economy, which relies mainly on oil, has been struggling. A further cut would make things worse and deprive states and the federal government of resources they need for the election.
Iran argues that it is currently under U.S. sanctions, and curbing its oil production would be similar to double punishments.
Libya and Venezuela are deep in crisis and social unrest in both countries have made resources needed there now more than ever.
Late Thursday, Saudi Energy Minister Khaled al-Falih said OPEC was debating a cut of about 1 million barrels a day, but the group hadn’t reach a deal on the size of a proposed cut.
The debate was whether all member-countries should cut production equally or whether Saudi Arabia and other larger producers should bear most of the burden.
Smaller oil producers fault overproduction from the Saudis and Emiratis for the price crash and think those countries should bear the brunt of cuts.
“OPEC had agreed in its formal meeting earlier Thursday to cut production but deferred naming a number until Friday, when it was scheduled to sit down with Russia. Russia and a group of producers from outside the Organization of the Petroleum Exporting Countries have been working with the cartel for the last two years to meter out production,” The Wall Street Journal said.
Russia and the United States are some of the bigger oil producers but are not members of OPEC.