25th May, 2017
OPEC decided on Thursday in Vienna to extend cuts in oil output by nine months to March 2018 to further battle a global glut of crude.
OPEC delegates said the cuts were likely to be shared again by a dozen non-members led by top oil producer Russia, which reduced output in tandem with OPEC from January.
OPEC’s cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of whom rely heavily on energy revenues.
Oil’s earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries, including Venezuela and Nigeria.
The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing with global crude stocks still near record highs.
Brent crude in early trading fell 1.3 per cent to around $53 per barrel as market bulls were disappointed OPEC would not deepen the cuts or extend them by as long as 12 months.
OPEC oil ministers are, however, continuing their discussions in Vienna after three hours of talks. Non-OPEC producers were scheduled to meet OPEC later in the day.
In December, OPEC agreed its first production cuts in a decade and the first joint cuts with non-OPEC, led by Russia in 15 years.
The two sides decided to remove about 1.8 million barrels per day from the market in the first half of 2017, equal to 2 per cent of global production.
Despite the output cut, OPEC kept exports fairly stable in the first half of 2017 as its members sold oil from stocks.
The move kept global oil stockpiles near record highs, forcing OPEC first to suggest extending cuts by six months, but later proposing to prolong them by nine months and Russia offering an unusually long duration of 12 months.
“There have been suggestions (of deeper cuts), many member countries have indicated flexibility but … that won’t be necessary,” Saudi Energy Minister Khalid al-Falih said before the meeting.
He added that OPEC members Nigeria and Libya would still be excluded from cuts as their output remained curbed by unrest.
Falih also said Saudi oil exports were set to decline steeply from June, thus helping to speed up market rebalancing.
OPEC sources have said the Thursday meeting will highlight a need for long-term cooperation with non-OPEC producers.