Oil remains weak after OPEC-led output cut extension falls below expectations

Parties to a measure coordinated by the Organization of Petroleum Exporting Countries are meeting in Vienna to review an agreement to sideline about 1.8 million barrels per day from the market in order to offset strains from the supply side.

"We support the extension of production cuts agreement that was agreed upon previous year for another six months", Mohammed Al Rumhy, Minister of Oil and Gas 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. The meeting was attended by members and non-members of OPEC.

Both benchmarks have climbed over 16 percent from their May lows.

Earlier yesterday, Opec chose to extend cuts in oil output to March 2018, as the producer group battles a global glut of crude after seeing prices halve and revenues drop sharply in the past three years. Investors hoped that the alliance would have gone further by extending the cut for a longer period.

The production cut, introduced in January, was initially only to cover the first half of 2017, but an ongoing glut has put pressure on OPEC and its allies to extend at a meeting in Vienna on Thursday.

After top oil exporters failed to impress markets with their extended supply cuts, Russia's Alexander Novak said there's more they can do. It has been trying to rebalance the oil market by cut its oil production amid surplus in the past two years.

This proved to be a key factor in the country securing exemption from OPEC's landmark 2016 deal to curb a global supply overhang.

Nigeria's Minister of State for Petroleum, Dr Ibe Kachikwu, had at the Offshore Technology Conference in Texas, announced that he would push for an extension at the high-level meeting.

Russian Federation maintains its oil-price outlook at $50 to $60 a barrel on average for this year, Novak said. I am not too sure.

"A nine-month extension just isn't enough to really lift oil prices as we'll continue to see USA shale fill the gap. The pricing outlook for oil has far more downside than upside potential". "So the region that it is in at the moment, it gives us the ability to plan", she said in an interview with CNBC. "We could have seen much worse reaction of the market if no decision to extend the declaration of cooperation was taken".

  • Zachary Reyes