Non-OPEC nations agree to cut oil output

The Dollar Business Bureau

Oil-producing countries, which are not the part of Organisation of the Petroleum Exporting Countries (OPEC), have agreed to reduce the output by around 562,000 barrels per day.

The deal between the two groups would be the first in 15 years for mutually limiting the oil production. The agreement is aimed to ease a global oversupply after over two years of low oil prices which have overstretched many nations’ budgets and created unrest in some nations.

Last week, OPEC decided to cut the output by 1.2 million barrels per day to 32.5 million barrels per day from January 1, with topmost exporter Saudi Arabia cutting its output as much as 486,000 barrels per day.

Before the meeting in Vienna on Saturday, Mohammed Barkindo, Secretary-General, OPEC said an agreement would boost the world economy by sending oil prices higher and thus help some rich nations tackle low inflation.

The prices of oil have gone down to more than half in the last two years after Saudi Arabia increased the production steeply in an effort to drive high-cost producing companies such as shale firms of the US out of market.

Oil prices plunge to less than $50 per barrel, and sometimes lower than $30 per barrel, from the high of $115 in mid-2014, which has helped cut the growth in US shale. However, it also affected the revenues of oil-dependent nations such as Saudi Arabia and Russia, prompting the two largest oil exporters to initiate their first cooperation talks since 2001.

Besides Russia, the talks were attended by or had commitments or comments sent from non-OPEC nations including Azerbaijan, Bahrain, Brunei, Bolivia, Equatorial Guinea, Malaysia, Mexico, Kazakhstan, Oman, Sudan and South Sudan.