OPEC’s supply accord commits its 11 participating members to 3% oil cuts: document

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OPEC and its allies have formalized their production quotas under their new supply deal, with Saudi Arabia, the world’s largest crude exporter, committing to a 322,000 b/d cut from its October level.

That puts Saudi Arabia’s cap at 10.311 million b/d, according to a document prepared by OPEC’s secretariat and seen by S&P Global Platts, though the kingdom has pledged to go further than that, with energy minister Khalid al-Falih saying production would fall to 10.2 million b/d in January.

Saudi output stood at 11.02 million b/d in November, OPEC data shows.

OPEC, Russia and nine other non-OPEC allies agreed earlier this month to a combined 1.2 million b/d supply reduction for the first six months of 2019 to shore up what many expect to be weakening market fundamentals ahead.

The coalition had declined to make public the new individual quotas, but appears to be reversing its stance to bolster market confidence in its efforts, amid sliding crude prices.

“There is pervasive market worry that the planned cuts by OPEC+ will not suffice, amid economic growth concerns, to offset the relentless increase in US shale supply and stabilize the market,” said Giovanni Staunovo, an oil analyst with investment bank UBS.

The agreement exempts troubled OPEC members Libya, Iran and Venezuela.

For the other 11 OPEC countries, the cuts represent a 3.04% reduction from the baseline October levels, as determined by an average of six independent secondary sources, except for Kuwait, which was given a September benchmark due to bad weather that impacted its production in October.

Iraq, OPEC’s second highest producer, will cut 141,000 b/d to reach an output level of 4.512 million b/d and third largest producer UAE will cut 96,000 b/d to average 3.072 million b/d, according to the document.

The non-OPEC countries are also using October as their baseline, except for Azerbaijan, which is using September, and Kazakhstan, which is using November.

Russia, the largest non-OPEC participant, has previously said it committed to reduce its production gradually by 230,000 b/d. The document says Russia’s quota under the deal is 11.191 million b/d.

Russian energy minister Alexander Novak said his country would lower its output by 50,000 to 60,000 b/d in January.

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