Bahrain Mirror: The Organization of the Petroleum Exporting Countries (OPEC) agreed on Wednesday (September 28, 2016) modest oil output cuts for the first time since 2008, at the time when the group's leader Saudi Arabia softens its stance on arch-rival Iran, amid mounting pressure from low oil prices.

According to Iranian Oil Minister Bijan Zanganeh and other ministers as well, OPEC would reduce output to a range of 32.5-33.0 million barrels per day. OPEC estimates its current output at 33.24 million bpd. 

Moreover, the source said, "However, how much each country will produce is to be decided at the next formal OPEC meeting in November, when an invitation to join cuts could also be extended to non-OPEC countries such as Russia."

Oil prices jumped more than 5 percent to trade above $48 per barrel as of 2015, while many traders said they were impressed OPEC had managed to reach a compromise after years of wrangling. On the other hand, other said they wanted to see details of the deal, during an informal meeting between members of OPEC in Algiers.

For his part, Jeff Quigley, director of energy markets at Houston-based Stratas Advisors, said that the size of production of each country is yet to be discovered.

"I want to hear from the mouth of the Iranian oil minister that he's not going to go back to pre-sanction levels. For the Saudis, it just goes against the conventional wisdom of what they've been saying," Mr. Quigley further noted.

The Saudi Energy Minister Khalid al-Falih had said Tuesday that Iran, Nigeria and Libya would be allowed to produce at logical maximum levels, in the framework of any deal to limit outputs, which could be reached in OPEC's next November meeting.

This therefore presented a strategy for Riyadh, which had said it would reduce output to ease a global glut only if every other OPEC and non-OPEC producer do the same. Iran has argued it should be exempt from such limits as its production recovers after the lifting of EU sanctions earlier this year, Reuters reported.

Meanwhile, according to the International Monetary Fund, the Saudi and Iranian economies depend heavily on oil but in a post-sanctions environment, Iran is suffering less pressure from the halving in crude prices since 2014 and its economy could expand by almost 4 percent this year.

Riyadh, on the other hand, faces a second year budget deficit after a gap of $98 billion last year, in addition to a stagnating economy, which forced it to cut the salaries of government employees.

Arabic Version