Opec extends output cut

In his opening remarks, OPEC President and Saudi Oil Minister Khalid al-Falih said the agreement was working to offset the supply-side strains, which have emerged more recently from US shale production.

The OPEC ministers will discuss the production accord with a group of non-OPEC members later in the day and are expected to hold a joint press conference at 17:00GMT (11:00AM ET).

U.S. West Texas intermediate crude futures fell $2.43 a barrel to $48.93, a 4.8 percent drop, breaking through $50 for the first time all week as volumes rose sharply.

The U.S. benchmark gained more than 1% to hit its strongest since April 19 at $52.00 in overnight trade.

By 0804 GMT, Brent crude was trading up nearly 1 percent, near $54.50 a barrel.

At Thursday's meeting in Vienna, Opec and some non-Opec producers agreed to extend supply cuts of 1.8 million barrels per day (bpd) until the end of the first quarter of 2018.

Rising US production could completely replace Opec's output cuts of 1.2 million bpd by year-end, according to RBN Energy. The extension means cuts will continue until March 2018.

OPEC sources have said the Thursday meeting will highlight a need for long-term cooperation with non-OPEC producers.

Another OPEC delegate told the news agency that a 12-month extension of the output cut is still an option. Cuts are likely to be shared among all participants of the deal.

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.

USA oil production has already risen by more than 10 percent since mid-2016 to more than 9.3 million bpd as drillers take advantage of higher prices and the supply gap left by OPEC and its allies.

Brent has averaged $53.90 per barrel so far this year.

Saudi Arabia, the largest producer among OPEC member states, openly supports the extension plan, though some other member states are suggesting a deeper oil cut.

Oil at $50 a barrel has encouraged more USA shale output, since production costs are down from a few years ago. He said "we broke bread" with shale producers at recent meetings in Houston and Vienna, adding, "we all belong in the same boat ...and with this breaking of the ice, we hope to develop this relationship further".

When asked how critical it would be for the oil producing cartel to extend an output reduction deal beyond June, the minister said the "general consensus" among oil producers was stability around the $60 a barrel mark would be a necessary milestone.

  • Leroy Wright