Members of the Organization of Petroleum Exporting Countries agreed to cut their production levels by slightly more than 1 million b/d effective Jan. 1, 2017, to 32.5 million b/d from the cartel’s October production of 33.6 million b/d.
OPEC delegates said the decision did not involve a change in production quotas but rather what OPEC is calling “an adjustment.”
In a statement, OPEC said, “The market rebalancing is under way,” adding that investment levels in oil and gas dropped worldwide in 2015-16 as a result of low oil prices.
The OPEC agreement was reached in Vienna with the expectation that key non-OPEC countries will adjust production downward by 600,000 b/d. Russia is expected to account for 300,000 b/d of that 600,000 b/d, OPEC officials said.
Saudi Arabia, OPEC’s biggest producer, agreed to reduce production by 486,000 b/d, officials said in a news conference.
Meanwhile, Indonesia—currently a net importer of crude oil—decided to suspend its OPEC membership. OPEC spokesmen said Indonesia could return to the cartel in the future.
The next OPEC meeting is slated for May 25, 2017, and the production adjustment could be extended for 6 months, said Mohammed Bin Saleh Al-Sada, OPEC president and Qatar Energy Minister.
Still with OPEC, the light, sweet crude oil price for January delivery fell steeply to settle just above $45/bbl on the New York market Nov. 29, but the benchmark rose in early trading Nov. 30 as the much-anticipated meeting of the Organization of Petroleum Exporting Countries got under way in Vienna.
OPEC has proposed capping production quotas at 32.5-33 million b/d, but cartel members were unable to reach any early agreement on how to do that in the days before the meeting.
Before the Nov. 30 meeting started, Iranian Oil Minister Bijan Zanganehon reportedly said his country intends to continue ramping up short-term production. He also said he believed OPEC would come to an agreement.
Iran reportedly has said it would be willing to freeze its production in early 2017 after it regains market share following the lifting of international sanctions earlier this year. No additional details were immediately available.
Saudi Arabia has sought a broad-based production quota cut for both OPEC and non-OPEC members. Saudi Energy Minister Khalid al-Falih did not talk with reporters after arriving in Vienna Nov. 29.
The January crude oil contract on the New York Mercantile Exchange fell $1.85 on Nov. 29 to close at $45.23/bbl. The February contract dropped $1.86 to $46.13/bbl.
The natural gas contract for January edged down less than a penny to a rounded $3.32/MMbtu. The Henry Hub spot market for natural gas closed at $3.03/MMbtu, up 12¢.
Heating oil for December declined 5¢ to a rounded $1.46/gal. Reformulated gasoline stock for oxygenate blending for December fell 3.6¢ to a rounded $1.38/gal.
The Brent crude contract for January on London’s ICE was down $1.86 to $46.38/bbl. The February contract dropped $1.89 to $47.32/bbl. The December gas oil contract fell $14.75 to $425.50/tonne.
The average price for OPEC’s basket of benchmark crudes on Nov. 29 edged up 3¢ to $43.87/bbl.