Jakarta – Saudi Arabia, Russia and all members of the OPEC coalition + agreed to cut production, which was greater than expected.
This made crude oil prices soar and ignored the desire of US President Donald Trump not to make a decline in production.
After holding a two-day meeting in Vienna, the Organization of Petroleum Exporting Countries agreed to erase the production of 1.2 million barrels per day from the oil market for the first quarter of 2019, more than 1% of global production, to boost prices.
After the decision was made, Brent oil prices soared 6% to US $ 63 per barrel before returning to around US $ 61 per barrel, with investors forced to change their valuations related to the amount of crude oil supply next year.
The decision will have an impact on all sides of the share price of shale oil producers in Texas, which soared after the meeting was over, to an increase in inflation rates in India, China and other consumer countries.
Meanwhile, the political implications involved are also large. The agreement is a testament to the strength of relations between Saudi and Russian who have cooperated for two years, countries that play an important role in making pacts.
It also confirmed that Saudi Arabian Prince Mohammed bin Salman was willing to reject Trump’s request even after the murder of journalist Jamal Khashoggi in Istanbul.
“I believe oil and gas producers in the US can also breathe freely after this decision was made,” Khalid Al-Falih, Saudi Arabia’s Minister of Oil, quoted from Bloomberg on Sunday (9/12).
Al-Falih also confirmed that Riyadh was serious about remaining in control of the market. Because the Oil King Country had agreed to provide additional production last November, Saudi Arabia would cut production to 900,000 barrels per day in January to 10.2 million barrels per day.
The number was assessed by a number of analysts very dramatically because the production cut was almost the same as stopping all production in Libya in just eight weeks.
“This will be felt in the spot oil market. The price may return to US $ 70 per barrel, ”said aBjarne Schieldrop, Head of Commodity Analyst at SEB AB.
Like the OPEC agreement that was made before, there must be a tough compromise in order to reach a decision. Iran forced to get an exception to cut production because it was being sanctioned by the US.
Finally, Tehran got the approval not to get involved in cutting production. Meanwhile, Venezuela and Libya also get relief.
Before the meeting was held, many OPEC observers predicted that there would be a maximum cut of 1 million barrels per day, many also thought that OPEC would delay the agreement for fear of fighting the US.
Al-Falih himself also gave a warning at the OPEC + first day meeting that he was not sure he would be able to reach an agreement.
To review the agreement made at the end of last week, OPEC has scheduled its next meeting in April 2019, earlier than usual.
That time coincides with expectations of tightening US sanctions on Iran when there is a possibility of relief for a number of Asian consumers to be extended.