Nigeria, Libya exempted as OPEC extends cut for nine months
- Author: Zachary Reyes Jun 01, 2017,
Jun 01, 2017, 2:13
Equatorial Guinea has been accepted as a new member of the Organization of the Petroleum Exporting Countries (OPEC), according to the Minister of Energy, Industry and Mineral Resources of Saudi Arabia Khalid Al-Falih.
OPEC has agreed to extend its supply deal for another nine months beyond June, said two delegates familiar with the matter, who asked not to be identified because the meeting hasn't yet concluded.
By 1430GMT, Brent crude was 0.7 per cent down at around $53.50 per barrel, having pared earlier losses after the Opec said it would not deepen the cuts or extend them by as long as 12 months.
This means that although much of OPEC claims it is cutting production, its member countries are exceeding their quotas.
The first agreement to cut production was achieved last December during an OPEC summit in Vienna.
With over a dozen other countries expected to join the cartel's efforts, the agreement is likely to cut off about 2% of the world's oil supply through March 2018, extending a decision the OPEC-led coalition reached a year ago. Wood Mackenzie said that, if meetings Thursday result in agreements to a deeper cut in production, oil would move to just over $60 per barrel. "So the region that it is in at the moment, it gives us the ability to plan", she said in an interview with CNBC.
OPEC members Nigeria and Libya would still be excluded from cuts as their output remained curbed by unrest.
Last year, the oil cartel chose to reduce crude production by 1.8 million barrels a day to offset the global oversupply for the first six months of this year.
US data this week show the steady drawdown in commercial crude oil inventories is continuing, but consumer fuels still show only minor decreases despite lower gasoline prices. Nigeria being now exempt from the cut measure needs to ramp up its production to get out recession.
Oil prices have risen less than OPEC hoped for from last year's levels.
The group could also send a message to the market that it will seek to curtail its oil exports, which have not declined as steeply as its production. The country aims at producing 2.2 million bpd this year.
Quigley said any official announcement would most likely come later in the day assuming non-OPEC countries decide to follow suit at their meeting also being held today.