OPEC Extends Oil Output Cut By 9 Months

Ivan Schwartz
June 8, 2017

The OPEC oil cartel and other producers, notably Russian Federation, are this week expected to extend last year's production cut in a concerted attempt to prevent oil prices from falling.

Brent, the global oil marker, was down 58 U.S. cents at $53.37 a barrel, partly on disappointment the cuts had not been increased in size or extended for even longer.

U.S. West Texas Intermediate (WTI) crude futures were up 38 cents, or 0.8 percent, at $51.74.

Both benchmarks have risen well over 16 percent from their May lows.

As expected, the Organization of the Petroleum Exporting Countries, along with other non-OPEC members, agreed to extend a cut in oil supplies of 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 to reduce a glut of supply.

OPEC's current deal, agreed at the end of past year, only covers the first half of 2017.

"There has never been a more important time to stand together and it is our honour to stand with Opec as a positive force in global energy. And Nigeria is not averse to that because I think everybody needs to make the necessary sacrifice to help the price stability on a worldwide basis", the minister said.

The price rise this year has spurred growth in the USA shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global crude stocks still near record highs.

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OPEC oil ministers were continuing their discussions in Vienna after three hours of talks.

OPEC is scheduled to meet again in November. The update came a day after the American Petroleum Institute reported a 1.5-million-barrel draw in commercial inventories, falling short of analyst expectations for a decline of 2.3 million barrels.

Despite the output cut, the Opec kept exports fairly stable in the first half of 2017 as its members sold oil from stocks.

Most OPEC ministers, delegates and the market see a nine-month extension - instead of the initially suggested six months - as the base-case scenario but some countries including Russian Federation have suggested an unusually long duration of 12 months.

It seems that markets were hoping for slightly more from today's meeting.

Until May 25, OPEC had 13 members, including Saudi Arabia, Iraq, Iran, the United Arab Emirates, Kuwait, Algeria, Qatar, Venezuela, Ecuador, Nigeria, Libya, Angola and Gabon.

"OPEC officials prefer.to wait and see the impact of an extension in helping rebalance the market prior to taking any more drastic actions", Woods said.

Other reports by GizPress

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