Oil producers join forces and cut production again

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Saudi Energy Minister Khalid al-Falih told reporters that the kingdom would deliver on its promise and take actions without delay, as its production will possibly fall to 10.7 million bpd in December and 10.2 million bpd in January.

Analysts say that without a substantial cut being announced at today's meeting, that downward pressure will continue.

FILE - Candles, lit by activists, protesting the killing of Saudi journalist Jamal Khashoggi, are placed outside Saudi Arabia's consulate, in Istanbul, during a candlelight vigil, October 25, 2018.

Saudi Arabia faces pressure from USA president Donald Trump to help the global economy by refraining from cutting supplies.

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Asked about pressure from Trump, Al-Falih said that oil companies in the United States would appreciate the group's efforts.

OPEC talks on oil production cuts reached deadlock on Friday as the group's leader Saudi Arabia refused to grant sanctions-hit Iran exemptions from planned reductions, OPEC sources said.

By agreeing on a level of cuts which was even deeper than expected, once again OPEC succeeded to surprise the market, a decision that definitely is not going to please the third musketeer which is probably already preparing his next tweet cascade.

OPEC members, including Saudi Arabia, will curb output by 800,000 barrels per day.

Also speaking at the start of the meeting between OPEC and partner countries, Russian Energy Minister Alexander Novak said he was "confident that our resolve to achieve results is as strong as ever".

Opec delegates have been pushing for Moscow to cut around 250,000 bpd.

Though al-Falih insisted that "we don't need permission from anyone to cut" production, the figure of a million barrels put forward by Saudi Arabia was lower than the reduction expected by the markets. Iran would get its exemption, but it wouldn't be mentioned in OPEC's written communique.

This outcome will give some temporary respite to the market, which rallied on the news of the deal on Friday. Hook, after all, is the person in charge of the waivers that Washington has granted to a handful of Asian buyers of Iranian crude. "We don't know the Iranian volumes which will be coming off the market", Croft said.

The question is whether a production cut by the OPEC in the wake of truce between the world's two biggest economies will lead to a rise in prices?

The agreement was reached on Friday at a meeting at the OPEC headquarters in Vienna.

The meeting was so diplomatically explosive that the Saudi Energy Ministry, at first, denied it happened. The price of oil has fallen about 25 percent recently because major producers - including the US - are pumping oil at high rates. "In June, Saudi Arabia and Russian Federation added 650,000 barrels per day", he said. The United States is not part of any output-limiting initiative due to its antitrust legislation and fragmented oil industry.

Against this backdrop, OPEC faced a particularly thorny challenge: Cutting too much and supporting prices at too high a level would risk curbing demand and supporting US production expansion; and reverting to a market share war would risk another price collapse, with the attendant collateral damage to producing economies.