Non-OPEC producers join OPEC in extending oil output cut: delegates

OPEC's de facto leader, Saudi Arabia, and top non-OPEC producer Russian Federation have said cuts need to be extended to speed up market rebalancing and prevent oil prices from sliding back below $50 per barrel. She argues that OPEC's attempts to strengthen crude prices by cutting production "won't work with high USA inventories".

According to two delegates attending the OPEC meeting in Vienna, OPEC has agreed to extend the current production cuts for a further 9 months until the end of March 2018.

The agreement between OPEC and non-OPEC countries would be impossible without Russian Federation, al-Falih told reporters after the press conference. And U.S. producers are poised to expand more, even if prices tick upward only moderately as a result of an oil-cut extension by OPEC and its partners.

The two sides made a decision to remove about 1.8m barrels per day from the market in the first half of 2017, equal to 2pc of global production.

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.

"We very much are benefitting from the improved oil price, you know it went as low as $28 a barrel".

The first agreement to cut production was achieved last December during an OPEC summit in Vienna.

Benchmark Brent crude traded at $53.08 a barrel as of 11:54 London, down 1.6 percent.

"If U.S. shale producers exceeded our projected increases, it'll drive the price down again", Arrington said.

"OPEC agreeing to nine months without deeper cuts leaves prices at the mercy of inventories and US production and demand", said Greg McKenna, chief market strategist at futures brokerage AxiTrader. This is why we haven't seen an enthusiastic response in crude prices following news of the deal, which we expect to remain in the range of $40-55/barrel this year.

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. But with the recent rise, many have returned to the market with a vengeance, with output nearing record levels. Iran's Bijan Namdar Zanganeh floated possible extensions of three months, six months or even a year and said his country had "no difficulty" with any of the options, while Jabbar Ali Hussein Al-Luiebi, his Iraqi counterpart, mentioned "the scenario of a nine-month freeze".

Following his Saudi counterpart, the Iranian oil minister said that crude priced between $55 and $60 a barrel is right for both OPEC and Iran. OPEC Secretary General Mohammad Barkindo said there is "growing consensus" for an extension.

  • Zachary Reyes