VIENNA—OPEC agreed Thursday to deepen curbs on crude output by about 40% next year, cartel officials said, as Saudi Arabia pushes for higher oil prices amid the initial public offering of its state-controlled oil company.
Prices moved only modestly on the news as investors questioned whether the cartel’s move would result in real output reductions: Saudi Arabia is already producing 400,000 barrels a day below its current quota, and OPEC ally Russia has received an exemption on sales of condensates such as propane and butane.
Brent, the international oil benchmark, gained 0.6% to $63.39 a barrel, while the U.S.’s West Texas Intermediate was flat at $58.43 a barrel.
Meeting here on Thursday, the Organization of the Petroleum Exporting Countries decided to augment collective production curbs by 500,000 barrels a day along with its allies until the end of March, delegates said. The cuts would mean OPEC will hold back a total of roughly 1.7 million barrels a day from global oil markets, deepening the current curb of 1.2 million barrels a day.
Ten non-OPEC nations led by Russia are expected to share the burden of the cuts, but delegates from those countries will need to formally endorse the proposal Friday. Moscow signaled plans to back the deal in a closed committee earlier Thursday.
Saudi Arabia, OPEC’s de facto leader which is pushing for the steeper cut, is taking a hard line to stabilize crude prices. Saudi Aramco priced its IPO Thursday at the high end of the targeted range to give it a total value of $1.7 trillion in the world’s biggest-ever IPO.
The state-controlled Saudi Arabian Oil Co., commonly known as Aramco, said it will sell 3 billion shares, or a 1.5% stake of the company, at 32 Saudi riyals ($8.53)—at the top of the targeted range of 30 to 32 riyals for a total of $25.6 billion. That exceeds the $25 billion IPO in 2014 of Chinese online commerce company Alibaba Group Holding Ltd., the current record holder.
OPEC’s discussions Thursday were a departure from the group’s relatively transparent gatherings. Most officials avoided speaking publicly to reporters, hoping to help the Saudis create an upside surprise in the oil market, according to people familiar with the talks. Participants didn’t submit the proposal to the OPEC secretariat as they usually would, the people said.
The crown princes of Saudi Arabia and the United Arab Emirates, Mohammed bin Salman and Mohammed bin Zayed, agreed on the cuts in a face-to-face meeting on the sidelines of a Formula One championship Saturday in Abu Dhabi, one person said. But Iraqi Oil Minister Thamir Ghadhban spoiled some of the positive impact by leaking the plan the same day.
Oil prices increased by less than 1% on the news as OPEC experts doubted the decision would lead to actual reductions. With the coalition already producing 450,000 barrels a day below requirements, “this is playing with facts and not the cut,” said Sara Vakhshouri, president of Washington-based consulting firm SVB Energy International. “It’s basically an assurance to the market that the current overall output will continue for the next three more months.”
Saudi Arabia is already pumping below its quota and has threatened to boost oil production unilaterally if some OPEC members such as Iraq and Nigeria continue to defy the curbs. The “Saudis aren’t cutting without full compliance,” said a person close to the kingdom’s delegation.
Even if Saudi Arabia imposes steeper reductions on nations that have repeatedly failed to comply with agreements, such a move would likely fail to shift the oversupply that analysts are forecasting for the first half of 2020, said Jamie Webster senior director at the Boston Consulting Group Center for Energy Impact.
“If OPEC+ signals [to] the market no real reduction in supply, then crude should sell off a bit, and we are back to status quo ante last week, when the market expected a rollover,” said Bob McNally, president of Rapidian Energy Group.
Write to David Hodari at David.Hodari@dowjones.com, Benoit Faucon at benoit.faucon@wsj.com and Summer Said at summer.said@wsj.com
