OPEC says it will extend production cuts through March 2018
- Author: Leroy Wright May 26, 2017,
May 26, 2017, 5:00
That could increase supplies and push down prices. That will be welcome news to consumers and energy-hungry businesses worldwide but could continue to strain the budgets of some of the more economically-troubled oil-producing nations, like Venezuela and Brazil.
The move kept global oil stockpiles near record highs, forcing OPEC first to suggest extending cuts by six months, but later proposing to prolong them by nine months and Russian Federation offering an unusually long duration of 12 months.
Earlier, Saudi Oil Minister Khalid A. Al-Falih spoke of a "9-month straight" extension going into the meeting. The Organization of Petroleum Exporting Countries will empower its monitoring committee to recommend "further interventions" if needed, Al-Falih said.
"All options are open", an OPEC source said, adding that a deeper cut in output was an option depending on estimated growth in supply from non-OPEC producers, mainly US shale oil firms, among other scenarios.
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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. Some non-OPEC countries, such as Russia, Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan promised to cut output by 600,000 barrels per day.
It has since maintained oil output levels at roughly 200,000 barrels per day since making the pledge.
Oil-producing nations belonging to Opec have agreed to extend production cuts for a further nine months.
More than 400 oil rigs are now working USA shale fields - an increase of more than 120 per cent compared with a year ago.
"This offsets almost half of OPEC's production cuts", it noted.
OPEC's national representatives and officials from its Vienna secretariat met on Wednesday and Thursday, sources said. 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".
"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", said Gary Ross, head of global oil at PIRA Energy, a unit of S&P Global Platts.
"Nine months was priced in", Sen said.