OPEC to slash output by 1.2mn bpd; Iran exempted

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Brent oil futures edged higher on Friday after Russian Federation seemed likely to contribute a bigger output cut to an Organisation of the Petroleum Exporting Countries (Opec) and non-Opec deal, but Saudi Arabia voiced pessimism on whether an agreement could be reached as Iran insisted on an exemption.

Oil prices went up about 5%.

Oil output from the world's biggest producers - Opec, Russia and the USA - has increased by 3.3 million bpd since the end of 2017 to 56.38 million bpd, meeting nearly 60 percent of global consumption.

The U.S. sold overseas last week a net 211,000 barrels a day of crude and refined products such as gasoline and diesel, compared to net imports of about 3 million barrels a day on average so far in 2018, and an annual peak of more than 12 million barrels a day in 2005, according to the U.S. Energy Information Administration.

Although the USA awarded last-minute sanctions waivers to major importers of Iranian oil, Iran began under-reporting its official export levels in mid-September, in an effort to evade sanctions.

The amount and the timetable of any cuts imposed by Russian Federation will also be a key sticking point. New York time. West Texas Intermediate for January delivery gained US$2.15 to US$53.64 a barrel on the New York Mercantile Exchange.

The oil price improvements came as a pair of junior Calgary oil companies announced they would cut payouts to shareholders and reduce production because of the current quarter's low oil prices to date. USA oil prices ended Thursday lower, due to concern that planned OPEC production cuts will be smaller than originally anticipated.

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

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The talks had earlier hit an impasse because Saudi Arabia refused to agree to an exemption for Iran, OPEC sources told Reuters. The kingdom is under economic pressure after a collapse in oil prices last month, yet it's seeking to walk a fine line between preventing a surplus next year and appeasing President Donald Trump.

Saudi Energy Minister Khalid al-Falih said he was not confident a deal could be reached. Saudi Arabia had previously said a 1 million barrel-a-day cut was the likely scenario.

Rebuffing Wednesday's tweets by Trump, Novak said the group's members make decisions based on the market situation, the balance between oil supply and demand and available reserves.

"The commitments made under this proactive collaboration between participating countries are to be voluntarily implemented, non-binding and would not in any way affect the rights of peoples and nations to permanent sovereignty over the exploitation and management of their natural resources", he said.

Saudi Arabia, which wields the clout among OPEC members by virtue of it being the top oil producer in the cartel, initially opposed the proposal to exempt Iran.

In the end, the meetings showed the art of the possible, with a sizeable 1.2 million bpd cut - 0.8 percent from OPEC itself, and another 0.4 million from its allies.

Sarah Ladislaw, head of the energy and national security program at the Center for Strategic and International Studies, knocked down the idea that being a net exporter would free the USA from global market dynamics.

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