OPEC, allies agree to oil production cuts: Report

OPEC members and ally Russia have tentatively agreed to cut oil production by 500,000 barrels per day.

OPEC would remove 340,000 barrels while non-OPEC producers, including Russia, would cut production by 160,000 barrels, news agency Reuters reported earlier. A sticking point in the talks had been how to split the cuts between producers.

Expanding on previous reductions, the agreement would remove a total of 1.7 million barrels a day, or about 1.7 percent of global supply.

The decision came after long discussions at the OPEC headquarters in Vienna. The group's goal is to support the price of energy, but they don't want to lose global market share to the United States, which keeps pumping more oil.

“We have decided to reduce production by 500,000 barrels a day through the first quarter of next year,” said Russian energy minister Alexander Novak.

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Saudi Arabia has been bearing the burden of the largest share of production cuts recently, but some countries have been producing more than expected. Analysts note that if countries are already not complying with the current agreement, voting for more cuts might be pointless.

Brent crude oil, the international benchmark, gained 2 percent to $64.65 per barrel after the cuts were reported, while West Texas Intermediate crude oil rose 2 percent to $59.58. Oil prices were trading at their highest levels in more than two months ahead of the decision.

Friday’s decision comes after the oil cartel agreed in July to a nine-month extension of production cuts that began in January 2017, when oil prices were about 10 percent below current levels.

OPEC and its allies have been caught flat-footed by the U.S. shale revolution. The U.S. passed Saudi Arabia as the world's top producer in 2018, as companies increased so-called fracking of shale deposits, extracting crude that was previously inaccessible.

The U.S. Energy Information Administration last month raised its 2020 production forecast by 119,000 barrels to 13.29 million barrels each day.

Last month, OPEC released its World Oil Outlook, which projects total primary energy demand will grow by 25 percent between 2018 and 2040, with oil demand reaching 110.6 million barrels each day. Demand will grow by 21.4 million barrels in emerging markets while decreasing by 9.6 million barrels in developed nations, the report said.

The next OPEC meeting is scheduled for March 5, and members will meet with their non-member allies the next day.

The Associated Press contributed to this article.