* After 2 days, OPEC+ surprise with sizeable 1.2 mln bpd cut deal
* Reduction to last six months, be reviewed in April
* OPEC, Russia & U.S. oil production:
* U.S. drillers cut 10 rigs to 877 total this week- Baker Hughes
(Adds settlement prices)
By Jessica Resnick-Ault
NEW YORK, Dec 7 (Reuters) - Oil prices ended more than 2 percent
higher on Friday after OPEC members and allies like Russia agreed to
reduce output to drain global fuel inventories and support the market,
but the gains were capped by concerns that the cuts would not offset
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 next year in a
move to be reviewed at a meeting in April.
This was larger than the minimum 1 million bpd that the market had
expected, despite pressure from U.S. President Donald Trump to reduce
the price of crude.
OPEC 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 the organization concluded two
days of talks in Vienna.
The deal had hung in the balance for two days - first on fears
that Russia would cut too little, and later on concerns that Iran,
whose crude exports have been depleted by U.S. sanctions, would
receive no exemption and block the agreement.
But after hours of talks, Iran gave OPEC the green light and
Russia said it was ready to cut more.
Russia gave a commitment to reduce output by 228,000 bpd from
October levels of 11.4 million bpd, though it said the cuts would be
gradual and take place over several months.
“Without cuts there would have been extreme downward pressure on
the market,” said John Paisie, executive vice president at Stratas
Advisors, a consultancy.
“I think the Saudis tried to walk a tightrope: they want to make
sure they maintain their relationship with the U.S., but they also
need to make some cuts because they need a higher oil price to balance
Brent crude rose $1.61, or 2.7 percent, to settle at $61.67 a
barrel. In early trading, the global benchmark had dropped below $60
when it looked as if the oil exporters might leave output targets
unchanged. It then rallied to a session high of $63.73 on news of the
agreement, before pulling back late in the session.
U.S. crude rose $1.12, or 2.2 percent, to $52.61 a barrel,
after earlier reaching a session high of $54.22.
U.S. crude was up 3 percent on the week and Brent was 4.8 percent higher.
Oil prices have plunged 30 percent since October as supply has
surged and global demand growth has weakened.
While the announcement of the cuts initially sent prices higher,
some of the enthusiasm cooled, on fears that the cut would not absorb
new output coming online in the United States that has made it the
word's top producer.
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.
Given supply due to come online, some analysts and market
participants said the cut may not be sufficient to end oil's rout.
“Relative to how big this looming supply tsunami is, 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, pleading with the Saudis
in twitter messages. Russia had initially balked at cutting production
Output from the world's biggest producers - OPEC, Russia and the
United States - 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 U.S. oil production
, which has jumped by 2.5 million bpd since early 2016 to a record
11.7 million bpd.
U.S. drillers this week cut oil rigs by the most in over two
years, after adding rigs in recent weeks, General Electric Co's
Baker Hughes energy services firm said in its closely followed
The rig count, an indicator of future production, fell by 10 oil
rigs in the week to Dec. 7, the biggest weekly decline since May 2016.
Still, at 877, the count was higher than a year ago when 751 rigs were
GRAPHIC: OPEC, Russia & U.S. crude oil production GRAPHIC:
U.S. turns into net exporter of oil
(Additional Reporting by Julia Payne and Christopher Johnson in
London and Henning Gloystein in Singapore; Editing by Marguerita Choy
and Bernadette Baum)