OPEC extends oil cuts for nine months

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.

That's because USA shale oil producers have taken advantage of the uptick in prices since previous year to ramp up production. Non-OPEC countries led by Russian Federation chipped in with a further 600,000-barrel reduction.

Among the scenarios being considered by the panel are a six or nine-month extension with a possible deeper cut, reports said. He spoke only on condition of anonymity because he was not authorized to divulge the information prematurely.

At a press conference in Vienna, Saudi Arabia's Energy Minister Khalid Al-Falih said he hopes USA shale producers will moderate their growth.

Oil's earlier price decline, which started in 2014, forced Russian Federation and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.

Gary Ross, head of global oil at PIRA Energy, part of S&P Global Platts, said: "Russia has an upcoming election and Saudis have the Aramco share listing next year, so they will indeed do whatever it takes to support oil prices". "Inventories are drawing down", he told reporters.

Some investors seem to have expected a longer extension.

The markets now fluctuate between an Opec gain and the rise in shale oil production with oil prices moving in a narrow range. USA shale production requires a higher price to be profitable.

Eleven non-members including Russian Federation joined the original deal in December, bringing total supply-reduction pledges to about 1.8 million barrels a day. I am looking at rebalancing more in the first quarter of next year. The OPEC oil cartel and other producers, notably Russian Federation, are this week expected to extend last year's production cut in a concerted attempt to prevent oil prices from falling.

"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. Nigeria being now exempt from the cut measure needs to ramp up its production to get out recession.

Libya and Nigeria, which have boosted output since the curbs started in January, will continue to be exempt from production cuts, he said.

While analysts at research firm IHS Markit expect OPEC revenues to rise modestly this year after dropping from their peak of $1.2 trillion in 2012, "the total will be less than half the level of 2012, when prices were more than double current levels". The decision was announced Thursday in Vienna, Austria at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC).

Their panel, the Economic Commission Board, was due to conclude talks on Thursday, but they finally ended on Friday, OPEC sources added.

Ministers from OPEC and its allies met in Vienna on May 25, to decide whether to prolong the agreement reached in November 2016.

  • Zachary Reyes