By Ahmad Ghaddar
LONDON (Reuters) – Oil prices rose sharply on Friday and were on track for weekly gains as a meeting of OPEC and its allies agreed to extend output cuts by 500,000 barrels per day in early 2020.
The additional cuts by the Organization of the Petroleum Exporting Countries and allies including Russia – a grouping known as OPEC+ – will last throughout the first quarter next year. The group will meet again in early March for an extraordinary meeting to set its policy.
OPEC will shoulder around two thirds of the additional cuts.
West Texas Intermediate oil futures
The cuts next year are in addition to OPEC’s previous cut agreement of 1.2 million bpd and represent about 1.7% of global oil output.
Saudi Energy Minister Prince Abdulaziz bin Salman said the Kingdom, the world’s largest oil exporter and OPEC’s defacto leader, would continue a voluntary cut of 400,000 bpd.
He added that after improved compliance from other members, the actual cut will be effectively 2.1 million bpd.
Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.
“North American shale supply will continue growing even in an environment with lower oil prices,” Rystad Energy said in a note.
Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.
The sale was the world’s biggest initial public offering (IPO), beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of a $2 trillion valuation for Aramco sought by Saudi Crown Prince Mohammed bin Salman.
Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.
(Additional reporting by Aaron Sheldrick in TOKYO; Editing by Christina Fincher and Louise Heavens)