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OPEC agrees oil output cuts to stem prices after much ‘brain squeezing’

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
This file photo taken on February 23, 2016 shows export oil pipelines at an oil facility in Iran’s Khark Island, on the shore of the Persian Gulf. (Photo by AFP)

The powerful OPEC group of oil producers and its allies have reached a deal on Friday to cut production by 500,000 barrels per day in a bid to stem prices which have been under pressure from abundant reserves and weak global economic growth.

Friday's so-called OPEC+ meeting included Russia, the world's second-largest oil producer and not a member of the cartel.

It ended with a deal for a cut effective as of January 1 which sets an output target 1.7 million barrels per day lower than October 2018 levels, with Saudi Arabia and Russia making almost half the additional reductions between them.

In a surprise move, the bloc also announced that several participating countries, "mainly Saudi Arabia", would make additional voluntary cuts bringing the overall cut to more than 2.1 million barrels per day.

World oil prices surged in response, with US benchmark WTI and its European counterpart Brent both rising two percent in an initial reaction before settling down at levels around 1.3 percent higher on the day in the late European afternoon.

On Thursday, a meeting of OPEC ministers had run late into the evening without a deal.

Saudi Oil Minister Prince Abdelaziz Ben Salman, who was at his first meeting in the post, said first-day talks lasting six hours saw delegations "laboring... until 11 o'clock in the evening, squashing their heads, squeezing their brains" in search of an agreement.

Iraqi Oil Minister Thamer Ghadban told reporters Friday that "what will happen during the first quarter (of 2020) will be assessed during an extraordinary meeting" of OPEC and its partners in early March.

He held out the prospect that the cuts could even be extended until the end of 2020 but that it was "too early to say now.”

(Source: AFP)

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