The Organization of
Petroleum Exporting Countries (OPEC) delegates
and non-member oil producers decided to extend the cuts in oil production on
Thursday by nine months, to March 2018, as the production group failed to fight
against global excessive crude after witnessing the price divides into half and
revenues rapidly decreased in the past three years.
The members of the cartel discussed
in Vienna, whether to prolong the cut production, and it appeared that 11
non-members agreed to cut oil output about 1.8 million barrels per day in the
first half of 2017. Most of the ministers, delegates and market see a nine-month
extension as the base-case scenario, but some countries, including Russia have
suggested a longer duration of cut of 12
months.
Maintaining the same level
of production through March 2018 “is a very safe and almost certain option to
do the trick”, Saudi Arabian Oil Minister Khalid Al-Falih said at the opening
session of the meeting in Vienna. It’s likely to be balanced earlier than
later”.
The cuts are likely to be
shared again by a dozen non-members, including Russia, which lessened output in tandem with the
Organization of the Petroleum Exporting Countries from January.
OPEC’s leader, Saudi Arabia,
and top non-OPEC producer, Russia, said that cut extension must be done to prevent the oil price from falling
down below $50 per barrel and also to speed up market rebalancing .
Prior to the decision, the
nine-month extension discussion on Thursday may include an option of another
three-month extension, according to the ministers from Nigeria and Russia. This
is similar to the accord of last year in which the option of adding extra
six-month extension was included.
OPEC’s cuts have helped push
oil back above $50 a barrel this year,
providing an economic boost to producers, many of which depend heavily on
energy revenues and have had to burn through foreign-currency reserves to pad
holes in their pocket.
The oil market is also
eyeing for hints as to what actions OPEC may do in 2018. There’s concern
whether OPEC could return to the free-for-all production that made the prices
to fall from 2014 to 2016.
“We have said we will do
whatever it takes”, said Al-Falih, commenting on the potential for action beyond
March 2018.
In a television interview
before the meeting on Thursday, Emmanuel Kachikwu, a Nigerian Oil Minister,
said that adding extra months in the deal will bring producers price
consistency.
WTI Crude oil lost 0.66% to
$51.14 by 10:36AM EDT, while Brent Oil is 0.48% to $53.70 by 10:35AM EDT.
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OPEC Extends Oil Production Cuts
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