OPEC and its allies led by Russia agreed Friday after a tension-filled week to implement 1.2 million b/d of production cuts from January 2019 to shore up flagging oil prices and prevent a supply surplus building.  The result no doubt came as a relief to Saudi Arabia, which had strongly pushed the cuts, but saw several OPEC members — notably geopolitical rival Iran — seek exemptions that threatened to undermine the deal. Even close ally Russia put the squeeze on Saudi Arabia to bear more of the cuts.

In the end, the kingdom relented on exemptions for Iran, Libya and Venezuela. OPEC would cut 800,000 b/d under the deal, or 2.5% of production for each member, with the 10 non-OPEC partners slashing 400,000 b/d, or 2%.  The cuts — using October as the baseline level, except for Kuwait, which will use September, as its production was impacted by bad weather in October — will last for six months, through the end of June. The 24-country OPEC/non-OPEC coalition will meet in Vienna again in April to assess progress amid concern over the health of the global economy and the impact of trade wars on demand.

“During a year when the global economy is facing lot of headwinds, it is not inconsequential what we have done,” Saudi energy minister Khalid al-Falih said at a press conference after the announcement. “We try to keep the market within reasonable band for consumers.”  Falih said Saudi Arabia’s production would fall to 10.2 million b/d in January, down from 10.7 million b/d expected in December as it makes the deepest reductions as part of the agreement.  Russia will reach its cut commitment gradually, over the course of a few months due to freezing winter and technical conditions, said energy minister Alexander Novak. He added that October output was 11.40 million b/d, so the agreed 2% cut the Kremlin has signed up to will be 228,000 b/d.