Azerbaijan says OPEC deal extension meets its interests

The proposed cuts are expected to be shared again by non-OPEC producers during a meeting later in the day.

The Organization of the Petroleum Exporting Countries (OPEC) renewed an agreement with 10 other crude-oil producers to withhold output through March 2018, a move aimed at putting a floor under the price of oil.

Brent crude dropped by $2.60, to $51.36 a barrel, while West Texas Intermediate dropped by $2.58, to $48.78 a barrel. The deal has witnessed unprecedented compliance level, especially from OPEC members that topped 100 per cent in April this year.

Wood Mackenzie's forecast followed speculation Tuesday from Kuwaiti Oil Minister Essam al-Marzouq, who said "all options are on the table" to balance the market, but a "remarkable leap in prices" was not expected for the rest of 2017.

Still, analysts were disappointed the group did not seek steeper cuts and a longer extension.

Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry of Qatar speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Thursday, May 25, 2017.

The goal is to siphon off a global oversupply of oil caused by a flood of production from USA shale producers and record levels of output from OPEC itself in 2016.

He said: "The new price of $54 per barrel should be seen as market response to the possible decision of OPEC to extend the production cut, which undoubtedly will reduce the glut or mop up excess supply of oil in the market".

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.

USA oil production C-OUT-T-EIA has already risen by 10 percent since mid-2016 to over 9.3 million bpd, close to the output of top producers Russian Federation and Saudi Arabia. Russian Federation and Saudi Arabia had hinted at such a deal early last week, following concerns that the initial deal would not be sufficient to balance the market sent prices down to Dollars 45 per barrel.

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.

"The cooperation between non-OPEC and OPEC countries will continue, as it has already yielded very good results", said Russian energy minister Alexander Novak.

  • Zachary Reyes