Opec Considers Nine-Month Extension in Output Cut
- Author: Zachary Reyes Jun 05, 2017,
Jun 05, 2017, 15:20
Saudi Energy Minister Khalid al-Falih noted a "trend" among participants to prolong the cuts for nine months, while OPEC Secretary General Mohammad Barkindo said there is "growing consensus" for an extension.
The decision comes as the producer group battles a global excess of crude that has seen prices halve and revenues drop sharply in the past three years.
It has since maintained oil output levels at roughly 200,000 barrels per day since making the pledge.
Non-OPEC producers, including Russian Federation, the world's largest oil producers, were to meet with OPEC to decide on their own output levels on Thursday, potentially amplifying the effect on the market.
US West Texas Intermediate (WTI) crude futures were back below $50, at $48.88, down 2 cents from their previous close.
Crude oil tumbled on Thursday even after OPEC and its allies extended their agreement to lower production by nine months.
"Although 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 - revenues have improved", said Darragh Crowley, energy trader with Bord Gáis Energy.
The Organization of the Petroleum Exporting Countries (OPEC)'s decision to extend the cuts from January comes as the world market saw oil increase to $50 a barrel in 2017, which gave fossil fuel producers a reprieve from a almost four year oil glut. A further extension might not be needed, as OPEC and independent producers expect to be "at the target at the year's end", the minister said.
Prices pushed above $54 in the months following the November deal, roughly doubling from the extremely low levels hit in early 2016 when there was severe oversupply.
"Our goal is to balance the market, ensure an investment flow into the industry, make the future more predictable for development of the oil industry".