OPEC extends oil output cut by nine months - delegate

Ivan Schwartz
June 3, 2017

"Today's decision in Vienna sends a signal of continued support for oil prices from OPEC which helps United States of America onshore drillers make plans", said Ann-Louise Hittle, Wood Mackenzie's vice president of macro oil research.

Later Thursday, Falih said "more time is needed" to help draw down inventories and balance the market.

Wood Mackenzie said that, if meetings Thursday result in agreements to a deeper cut in production, oil would move to just over $60 per barrel. But the hoped-for benefits could be short-lived. "The growth in US production is indeed daunting for the oil bull case", Jefferies said.

Crude prices increased incrementally during the past three months, moving up around $47 dollars a barrel as of March, which is far less than the $108 a barrel oil was selling for in June 2014.

Rather than restrain output, USA producers are expected to increase output by more than 1 million barrels of oil per day next year. Non-OPEC countries will attend the meeting, including Russia's Energy Minister Alexander Novak.

Martinez said he expected the current deal to be extended by nine months, but that six months "was an option".

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.87, up 51 cents, or 1 percent.

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Non-OPEC producers including Russian Federation also agreed to cut production through March, said Bijan Namdar Zanganeh, Iran's minister of petroleum, according to Bloomberg.

Nigeria and Libya were again excluded from this latest cuts as their output remained curbed by unrest, Saudi Energy Minister Khalid al-Falih said.

Al-Falih said that the cuts had achieved a key aim.

Hopes are running high ahead of Thursday's OPEC meeting that members will agree to further cuts to output in a bid to maintain price stability.

But since fracking required substantial investment, when oil prices plummeted in 2015 and 2016, output from shale in the United States fell around 900,000 barrels a day, equivalent to nearly 1 per cent of the global supply. Crude prices are unlikely to rise substantially - and that means the era of windfall profits appears to be over for member nations, at least for now.

However, "if they can keep prices in this range until demand picks up, and not suffer too much, maybe they can push prices to $70 and even $80 in a few years", he added.

OPEC has yet to make an official announcement.

Other reports by GizPress

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