OPEC agrees to extend oil production cuts

The news of Equatorial Guinea's admission comes as OPEC ministers meeting in Vienna on Thursday agreed to extend a deal on production cuts for a further nine months.

Opec will extend its production cuts into 2018, as the oil cartel and its allies attempt to end a three year supply glut that has hammered crude prices.

Production cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers heavily dependent on oil revenues.

Brent crude in early trading fell 1.3 per cent to around $53 per barrel as market bulls were disappointed OPEC would not deepen the cuts or extend them by as long as 12 months.

OPEC agreed to keep its own cuts of around 1.2 million barrels per day in place for nine months, Kuwaiti Oil Minister Essam al-Marzouq said, Reuters reports.

On Wednesday a joint committee of producers "decided to recommend that the production adjustments of the participating countries be extended for nine months", OPEC said.

Saudi Arabia's energy minister, Khalid al-Falih, said OPEC was highly likely to roll over its existing agreement on the same terms for nine months.

OPEC has committed to an extension of the limit in crude oil production to 1.8 barrels a day until March 2018 in the hope of achieving sustained price recovery. West Texas Intermediate crude oil, the USA benchmark of prices, rallied about 17% from its year-to-date trough at the beginning of May through Wednesday.

OPEC and non-OPEC countries held a meeting in Vienna May 25 to make a final decision on extension of the oil output cut deal reached in 2016.

The Organization of the Petroleum Exporting Countries agreed at a Vienna meeting to carry forward supply cuts through at least next March in order to help balance global supply and demand. US light crude CLc1 was 20 cents lower at $51.16.

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.

It estimated that a nine-month extension would result in a 950,000 barrels a day production increase in the USA, thus undermining Opec's efforts to balance supply and demand.

  • Zachary Reyes