Oil Prices Won't Be Affected by OPEC Cut Extension

Al Jazeera's Sonia Gallego, reporting from Vienna, said that "although [US shale production] has evolved from what it was years ago - it has had to cut back and reinvent itself - the Saudis have maintained that that level of production is not going to affect OPEC".

OPEC extended oil production cuts for nine more months after last year's landmark agreement failed to eliminate the global oversupply or achieve a sustained price recovery.

Oil prices continue to see pricing pressure because OPEC "keeps kicking the proverbial can down the road", said Chris Faulkner, CEO of Breitling Energy, a Dallas oil and gas exploration and production company. The decision was announced Thursday in Vienna, Austria at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC).

He added that cuts could be extended further when OPEC and non-OPEC producers next meet in Vienna on November 30. But the hoped-for benefits could be short-lived. The curbs were meant to last six months from January, but confidence in the deal, which boosted prices as much as 20 percent, waned as inventories remained stubbornly high and US output surged.

Commerzbank (Xetra: CBK100 - news) analysts predicted Wednesday compliance to the producers' deal will "falter" in the second half of the year and for the price to dip below $50 per barrel. Their output already is partially offsetting the cuts, and even more USA companies are poised to return if prices rise further.

Equatorial Guinea has been accepted as a new member of the Organization of the Petroleum Exporting Countries (OPEC), according to the Minister of Energy, Industry and Mineral Resources of Saudi Arabia Khalid Al-Falih.

In December, OPEC agreed its first production cuts in a decade and the first joint cuts with non-OPEC, led by Russian Federation, in 15 years.

"The nine-months had already been baked in and a lot of people where already trading on that assumption".

"You need to look at each country's interest, not its words", Scacciavillani said in an interview in Dubai. "This means a reduction in supply to the US of close to 1 million barrels a day", it said in the report. While he expects a "healthy return" for USA shale, that won't derail OPEC's goals. That deal gave the Islamic Republic room to increase output to a maximum of 3.797-million barrels a day.

The U.S. oil benchmark fell as much as 5.1 percent from $51.36 to $48.75 on Thursday, underscoring how much speculators had driven up the price based on rumors that Saudi Arabia might persuade its fellow OPEC producers to cut production even deeper than it had in the first five months of the year.

"This offsets almost half of OPEC's production cuts", it noted.

"Over and above extending, we need to continue to engage; we need to find a way to stabilise global oil price, otherwise everybody will lose out", the minister added.

  • Zachary Reyes