OPEC To Extend Production Cuts For Nine Months

"There have been suggestions (of deeper cuts), many member countries have indicated flexibility but ... that won't be necessary", Saudi Energy Minister Khalid al-Falih said before the meeting.

"What we may expect in the medium term is price hovering around $50 per barrel, depending on the market perception of oil supplies to world oil market".

"Nine months was priced in", Sen said.

"The U.S. shale producer does what everyone thought was impossible".

Should the meeting in Vienna result in a cut extension to cover all of 2018, Wood Mackenzie said the tighter market could push average 2018 Brent prices up to $63 a barrel.

Equatorial Guinea has become the 14th member of the Organization of Petroleum Exporting Countries (OPEC).

OPEC members made a decision to cut production by 1.2 million barrels per day.

Thursday's agreement will extend by nine months a deal made at the end of previous year to cut oil production.

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.

A delegate from one of the cartel's member nations said the cuts are likely to be shared by countries from outside the price-fixing group, according to Reuters. Brent crude oil, the worldwide benchmark, also dipped to $51.71 or 4%.

"Opec hasn't achieved its stated aim of a global glut of oil inventories back to normal levels - thanks mainly to a resurgent U.S. shale oil industry which has taken up much of the slack in the reduced Opec output". Earlier this month it issued an unusual request asking other producers outside the cartel to stop pumping so much and help balance the market.

That could increase supplies and drag down prices again.

Al-Falih said that the cuts had achieved a key aim. At over $50 a barrel, benchmark crude sits substantially below the highs reached in 2014, but is priced high enough to bring back into the market United States producers who eased back as prices tumbled a year ago.

"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", Gary Ross, head of oil company PIRA Energy, told reporters about the underlying reasons for OPEC's move. OPEC hadn't yet announced the production levels for the agreement on Thursday.

Opec and major non-Opec nations put in place production cuts at the start of this year in a bid to stabilise oil prices.

  • Zachary Reyes