OPEC oil squeeze to remain, but will it lift prices?
- Author: Zachary Reyes Jun 06, 2017,
Jun 06, 2017, 10:15
OPEC decided it would extend cuts in oil output by nine months to March 2018 on May 25, an OPEC delegate said according to a Reuters report. "Today's decision in Vienna sends a signal of continued support for oil prices from OPEC which helps U.S. onshore drillers make plans", said Ann-Louise Hittle, Wood Mackenzie's vice president of macro oil research.
With a production of around 300,000 barrels per day, the Central African country is one of OPEC's smallest oil producers, OPEC statistics show.
"The two countries are still well below the expected output quota, it is in our interest to be friendly and brotherly, and exempt them so that they get the maximum revenue from the amount produced".
Brent crude oil dropped as much as $1.24 a barrel to a low of $52.72 before regaining some ground to trade 80 cents lower at $53.16 by 1100 GMT.
Martinez said he expected the current deal to be extended by nine months, but that six months "was an option".
It estimated that a nine-month extension would result in a 950,000 barrels a day production increase in the U.S., thus undermining Opec's efforts to balance supply and demand.
US West Texas Intermediate (WTI) crude futures were back below $50, at $48.88, down 2 cents from their previous close.
Oil prices fell almost 5 percent today as OPEC's decision to extend production curbs fell short of expectations of deeper or longer cuts.
There had been some hopes of that a 12-month extension could be agreed or that there would be a deeper cut to output levels.
(Ecofin Agency) - Nigeria's oil minister, Emmanuel Kachikwu (photo), said Nigeria is not opposed to joining the cut measure of OPEC.
The extension would come after a landmark deal at the end of 2016 which saw Opec and other countries, including Russian Federation, agree to cut production by 1.8m barrels per day in the first half of this year.
Even a decision to maintain oil cuts thus is likely to only kick the can down the road from Thursday's meeting until OPEC ministers convene again late this year.
However, the fracking method used to extract oil from rocks in the U.S. has recently become more efficient and therefore less vulnerable to low prices. OPEC hadn't yet announced the production levels for the agreement on Thursday.
OPEC's current deal, agreed at the end of a year ago, only covers the first half of 2017.