OPEC aims to extend supply curbs as oil glut persists

The decision was taken after delegates from member and non-member nations met in Vienna, Austria to deliberate on the way forward after seeing revenues from crude drop sharply in the past three years.

The Organization, Russia, and other major oil producers agreed to curb production by 1.8 million barrels per day (bpd) for six months from January 1 to support the market and push prices to $60 per barrel.

While, OPEC's cuts have helped oil again to go back above $50 a barrel this year, which has given a fiscal boost to producers.

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.

The 12 OPEC members and 11 non-members agreed to extend production cuts by 1.8 million barrels per day during their meeting in Vienna.

OPEC president, Khalid al-Falih who is Saudi Arabia's Energy minister, on Thursday officially welcomed Equatorial Guinea's Mines and Hydrocarbons minister, Gabriel Obiang to group at the 172nd OPEC meeting in Vienna.

The oversupply of oil in the market should not persist past the third quarter as inventory numbers are declining and continue moving in a downward trend despite higher US production and high levels of imports, said Patrick Morris, CEO of New York-based HAGIN Investment Management. But Nigeria and Libya were exempted from the cuts because their production had suffered disruptions on the back of unrest and militant attacks.

The extension means cuts will continue until March 2018.

The alliance between OPEC and non-OPEC countries faces competition from USA shale producers.

(Ecofin Agency) - Nigeria's oil minister, Emmanuel Kachikwu (photo), said Nigeria is not opposed to joining the cut measure of OPEC. With prices above $50 from lows of a year ago, they are increasingly moving back into the market.

OPEC and independent producers are working on institutionalizing the cooperation between them, but there is still a lot of work to be done in order to achieve this goal, according to al-Faleh. OPEC hadn't yet announced the production levels for the agreement on Thursday. That, in turn, is increasing supply and keeping a lid on price gains.

"A nine-month extension is insufficient at shale's current trajectory".

The International Energy Agency, which advises rich countries on oil policy, said earlier this month that OPEC has a "financial motivation to extend the supply cuts".

While an extension of that length at the se output levels is the best option, there are various proposals, including one with deeper cuts, said Iraqi Oil Minister Jabbar Al-Luaibi.

"If we keep to the rules, if we keep to the discipline - all the numbers show good compliance - then we should look at a $50 floor", he said.

  • Zachary Reyes