OPEC clinched a deal to curtail oil supply, confounding skeptics as the need to clear a record global crude glut -- and prove the group’s credibility -- brought about its first cuts in eight years.
OPEC will reduce production by 1.2 million barrels a day to 32.5 million a day, two delegates said Wednesday during a ministerial meeting in Vienna, asking not to be identified as the decision isn’t yet public. Benchmark Brent crude rose 8 percent to $50.07 a barrel in London at 1:37 p.m. local time.
After weeks of often tense negotiations, the Organization of Petroleum Exporting Countries’ three biggest producers -- Saudi Arabia, Iraq and Iran -- resolved differences over sharing the burden of cuts. Notably, it appears the Saudis accepted that Iran, as a special case, can raise production to about 3.9 million barrels a day. The agreement is also likely to include an additional reduction of about 600,000 barrels a day by non-OPEC countries.
“This should be a wake-up call for skeptics who have argued the death of OPEC,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. “The group wants to push inventories down.”
The deal promises to revive the tattered finances of countries from Venezuela to Libya and restore flagging confidence in the producer bloc that controls 40 percent of the world’s oil. But the consequences will reverberate far beyond OPEC, giving a boost to U.S. shale drillers crippled by a two-year price rout and oil giants such as Royal Dutch Shell Plc, which have cut spending to the bone to weather the prolonged downturn.
So the countries Trump has repeatedly criticized during his campaign like Iran, Venezuela and Libya stand to benefit the most from a new, more muscular OPEC. Like it or not, the global energy trade war that Trump all but promised is on, and rising oil and gas prices are just the first step.
Trump will of course look to retaliate by wrecking the environment to put new drilling and fracking everywhere in the US in order to try to boost production instead of beating OPEC at their own game as Obama has and lowering demand through alternative energy. He played hardball.
Trump on the other hand just helped his Saudi buddies make billions off of US consumers, and then there's the biggest non-OPEC economic winner when the price of oil goes up: Russia. It's almost like there's a pattern here, guys.
So we'll have an oil price war AND global warming accelerating. Won't that be fun?