Oil prices surge on OPEC deal to cut output by 1.2m barrels

The price of Brent oil rocketed Friday on reports that OPEC and non-OPEC crude producers had agreed to slash output. (Reuters)
Updated 08 December 2018
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Oil prices surge on OPEC deal to cut output by 1.2m barrels

  • Oil prices have plunged 30 percent since October as supply has surged and global demand growth has weakened
  • OPEC is seeking support from non-OPEC Russia for supply cuts

NEW YORK: Oil prices jumped more than 4 percent on Friday as Saudi Arabia and other producers in OPEC, as well as allies like Russia agreed to reduce output to drain global fuel inventories and support the market.
The Organization of the Petroleum Exporting Countries and its Russia-led allies, referred to as “OPEC+,” agreed to slash production by a combined 1.2 million barrels per day from 2019, larger than the minimum 1 million bpd that the market had expected, despite pressure from US President Donald Trump to reduce the price of crude.
The producer club will curb output by 800,000 bpd from January while non-OPEC allies contribute an additional 400,000 bpd of cuts, Iraqi Oil Minister Thamer Ghadhban said after OPEC concluded two days of talks in Vienna.
Russian Energy Minister Alexander Novak confirmed the combined output cuts of 1.2 million bpd, saying that the market will be oversupplied through the first half of the year.
Brent crude rose $2.94 to $63.00 a barrel by 11:20 a.m. EDT. In early trade, the global benchmark fell below $60 when it looked as if oil exporters might leave production targets unchanged. The benchmark rallied to a session high of $63.73 on news of the agreement.
US crude rose $2.20 to $53.69 a barrel, after earlier reaching a session high of $54.22.
US crude was on track to end the week up 5.2 percent and Brent was 6.9 percent higher on the week so far.
A 1.2 million-bpd cut, if implemented fully, “should be enough to largely attenuate, but not eliminate, expected implied global inventory builds in the first half of next year,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.
Oil prices have plunged 30 percent since October as supply has surged and global demand growth has weakened.
Prices fell almost 3 percent on Thursday after OPEC ended a meeting in Vienna with only a tentative deal to tackle weak prices. Talks with other producers were held on Friday.
But Iran gave OPEC the green light on Friday to reduce oil output after finding a compromise with rival Saudi Arabia over a possible exemption from the cuts, an OPEC source said.
Oil output from the world’s biggest producers — OPEC, Russia and the US — has increased by 3.3 million bpd since the end of 2017 to 56.38 million bpd, meeting almost 60 percent of global consumption. 
The surge is mainly due to soaring US oil production, which has jumped by 2.5 million bpd since early 2016 to a record 11.7 million bpd, making the US the world’s biggest producer.
The US rig count, an indicator of future output, has risen for five straight months, The latest weekly data is due at 1 p.m. EST.
Given supply that is coming to be online, some analysts and market participants say the cut may not be enough to end oil’s rout.
“Relative to how big this looming supply tsunami, it is not nearly enough to prevent big inventory builds next year,” said Robert McNally, president of Rapidan Energy Group in Washington. “President Trump and President Putin prevented OPEC+ from cutting by more, which was certainly needed to put a sturdy floor under prices. They are putting a fuzzy floor under prices.”
Trump has asked OPEC to keep prices low. Russia had initially balked at cutting production alongside OPEC.


Passenger numbers rise at Dubai International Airport

Updated 10 December 2018
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Passenger numbers rise at Dubai International Airport

  • Operator welcomes monthly jump after travel decline in past year
  • Dubai Airports launched its Strategic Plan 2020 in 2011 with the aim of increasing passenger capacity from 60 million a year to 90 million by 2018

LONDON: The number of passengers passing through Dubai International Airport rose by 2.1 percent in October compared with the same month last year, the operator Dubai Airports said on Monday.

The increase follows a drop in passenger traffic in September and a wider slowdown in the number of travelers passing through the emirate’s airport over the past year.

“Dubai International has been on record stating that passenger growth would be somewhat lower than in previous years, so this current performance is in line with my expectations,” said aviation analyst Saj Ahmad from Strategic Aero Research.

“That said, the airport has still grown over 2017 and will likely eclipse its 2018 target of handling over 90 million passengers and remain the world’s busiest international airport,” he said.

Dubai Airports CEO Paul Griffiths told a conference in Dubai last month that he expected just over 90 million passengers to use the airport this year, according to Reuters.

A total of 7 million passengers used the airport in October, compared with 6.9 million in the same month last year.

In September, passenger traffic fell by 0.2 percent compared with the previous year. The decline was blamed on the Eid Al-Adha holiday — with an associated spike in travel — falling in September last year.

Total passenger traffic in 2017 rose by just 5.5 percent year-on-year to reach 88.24 million people. This is a slower rate of growth than the 7.2 percent increase in 2015-16 and the 10.7 percent jump recorded between 2014-2015.

Dubai Airports launched its Strategic Plan 2020 in 2011 with the aim of increasing passenger capacity from 60 million a year to 90 million by 2018.

Under the strategy, the number of airport stands has been increased and terminal buildings expanded.

As demand grows, further work on the airport’s infrastructure will be needed, said Ahmad.

“Demand is not infinite — the airport is operating at nearly 98 percent capacity, so it stands to reason that only so much growth can be absorbed,” he said.

DXB handled 237,499 tons of cargo in October, a 2.5 percent increase on the previous month. Overall cargo volumes have fallen year-to-date by 0.9 percent to 2.1 million tons.