It had been surprisingly difficult to reach an agreement. Thursday`s meeting had been delayed by two days, while officials struggled to reach a consensus. “This is at least a temporary relief for the energy sector and for the global economy. This industry is too big to fail and the alliance has shown responsibility with this deal,” said Per Magnus Nysveen, director of analysis at Rystad Energy. Even if the production cuts are less than what the market needed and only push back the problem of storage restrictions, the worst is avoided for now. OPEC and other Russian-led oil-producing nations, which are trying to measure the strength of the global economy as the coronavirus continues to rage, but with vaccines on the horizon, reached a compromise on Thursday to moderately increase production in January. Under the agreement, members of the Organization of the Petroleum Exporting Countries, along with Russia and other countries, will increase production by 500,000 barrels per day in January and possibly by a similar amount in the following months. The less than 1 percent increase in the global oil market comes as demand is still under pressure from the effects of the coronavirus pandemic. “I applaud OPEC-plus for reaching an important agreement that comes at a crucial time when oil demand is recovering and economies around the world are reopening,” U.S. Energy Secretary Dan Brouillette wrote on Twitter after the extension. Saudi Arabia and Russia on Sunday reached an agreement with other oil-producing countries to cut production by 9.7 million barrels a day for the next two months, in order to stem the fall in oil prices caused by the coronavirus pandemic and the quarrel between Moscow and Riyadh. The cartel and other nations have agreed to allow Mexico to cut just 100,000 barrels a month, a sticking point for a deal reached Friday after a marathon video conference between 23 nations. They reached the deal just hours before Asian markets reopened on Monday, with Brent, the international benchmark crude, trading at just over 31 $US a barrel and struggling U.S. slate producers.
Iran`s oil ministry confirmed the overall cut of 9.7 million for May and June and said the deal would lead Mexico to cut production by just 100,000 barrels for those two months alone. This was a sore point for the agreement that was supposed to boost world energy prices. The deal is massive and is the biggest production cut in OPEC`s history. The reduction is more than twice as large as the oil cartel`s reduction of 4.2 million barrels per day following a series of cuts during the 2008 financial crisis. However, analysts say it is likely overshadowed by the size of the loss of demand due to the pandemic. Sunday`s deal follows a busy week for oil ministers. On Friday, the Group of 20 held a separate virtual meeting to discuss the state of global oil markets, giving rise to speculation that it may be possible to further reduce production. . . .