After OPEC deal, Texas oil regulator boasts of victory
- Author: Zachary Reyes May 26, 2017,
May 26, 2017, 20:28
The Organization of the Petroleum Exporting Countries on Thursday renewed an agreement to withhold some crude-oil supplies into March 2018, people familiar with the matter said, doubling down on its bet that it can raise prices despite soaring output from American shale producers.
That means USA shale may emerge as the deal's biggest beneficiary, a reality that highlights the pressure on the two massive players, Saudi Arabia and Russian Federation, to extend their output agreement-even though so far it hasn't significantly lifted prices or drained a global oversupply of petroleum.
Already, Saudi Arabia and Russian Federation, a non-OPEC state - both world's top two oil producers - have agreed on the need to prolong the current cuts until March 2018.
"First, our production is still relatively about 1.5 million barrels on an average although we have had spikes, still below the 1.8 catch point", he said.
At the same time rising oil prices tend to spur growth in the USA shale industry, which is not participating in the output deal, thus rebalancing global crude stocks at near record highs. West Texas Intermediate was off 46 cents at $50.90 per barrel.
Brent for July settlement slipped 17 USA cents to US$53.79 a barrel on the London-based ICE Futures Europe exchange.
"Nine months was priced", she said.
Novak said OPEC and non-OPEC oil exporting partners had instruments in place to tackle a collapse in oil prices, in an interview with CNBC on Thursday.
Analysts also said that the OPEC-led production cuts would support a further rise in USA output.
The deal is aimed at bolstering petroleum prices, which have remained relatively flat as USA shale oil producers turned on the spigot to make up for reduced OPEC output.
The kingdom has allied with Russian Federation in vowing to rebalance the market after the halving of oil prices since 2014 decimated the budgets of oil-dependent producers and upended the global energy industry.
It made the decision to cut production in the hopes of tackling a major global glut which had pushed the price of oil down to less than half of its mid-2014 level. This means that although much of OPEC claims it is cutting production, its member countries are exceeding their quotas.
"The prospect at the end of last month that an agreement might not happen saw oil prices hit their lowest levels since the end of November, so anything short of a nine month extension is likely to fall well short of market expectations", said Michael Hewson, chief market analyst at CMC Markets. "But all indications discovered that a nine-month extension is the optimum", Khalid al-Falih said.