Nigeria, Iran and Libya got special concessions on Wednesday, as the Organisation of Petroleum Exporting Countries (OPEC) agreed to cut oil production by 1.2 million barrels per day, effective January 1, 2017.
The cut, which is coming after 8 previous attempts failed since 2008, is considered a massive boost to efforts by the global oil cartel to shore up oil prices and end a record glut that has paralyzed economies.
Speaking at the opening of the 171st ordinary meeting, Mohammed Bin Saleh Al-Sada, OPEC conference president, expressed optimism that the deal would become a reality, considering work done since the Algiers accord was consummated.
He said: “As the history of OPEC has shown and as many of our predecessors will no doubt acknowledge, the road to success is not always easy to navigate.”
“However, as we have shown over the past few months, with hard work, drive and commitment from all of us, we can overcome challenges and obstacles through cooperation and compromise.
“I feel we have already taken great steps to shape a fair and common understanding among us all. And I have the sense that everyone here remains committed to ensuring we find the solutions needed to implement the ‘Algiers Accord’.
“We all have a common goal of developing a lasting solution that brings forward the rebalancing process, reduces the length of the downturn, lessens volatility and stabilizes the market.”
While initiating the resolution in September, three countries, namely Nigeria, Iran and Libya were proposed as candidates for exemptions in consideration of their peculiar circumstances.
Nigeria was recommended for exemption to enable it recover from the negative impact of incessant attacks on its oil facilities by armed militant groups in the Niger Delta region, which resulted in a massive cut in its production and exports capacities.
Libya was equally proposed for special consideration on similar grounds, following series of attacks on its oil facilities by terrorists groups operating in that region in recent months.
While Iran was excluded to allow the country settle down and recover, after serving years of U.S.-imposed sanctions, including restrictions on its oil production and exports.
Following the news of the cut, crude oil prices rose by more than 10 percent.
At 0630 GMT on Thursday, after a brief dip in early Asian trade, US benchmark West Texas Intermediate for January delivery was up 70 cents or 1.42 percent at $50.14, while Brent crude for February was 81 cents or 1.6 percent higher at $52.65.
“Not only had hopes of higher prices been realised, the reputation of the OPEC has also been salvaged, prompting the surge,” said Jingyi Pan, market strategist at IG in Singapore.
“Sceptics have now placed their focus on the implementation of the OPEC deal where Saudi Arabia will be shouldering the bulk of the cut.”
OPEC is expected to officially speak on this at a press conference by 4pm Nigerian time.