Yemisi Izuora
The Organization of the Petroleum Exporting Countries, OPEC, and its partners Thursday took a collective decision to extend the output cut till the end of 2018, nine months longer than the previous agreement.
At the crucial meeting twenty-four countries agreed to maintain production cut of about 1.8 million barrels per day (bpd) until December 31, 2018, said Khalid Al-Falih Saudi Arabian Minister of Energy, Industry and Mineral Resources, reports Xinhua.
The decision came within analysts’ expectation though Russia, ahead of the meeting, expressed concern over the extension of the output cut.
In 2016, the OPEC countries reached an agreement in Vienna to reduce daily oil production during the first half of 2017 to boost global oil prices. The agreement was also supported by 11 non-OPEC states. In late May, the parties to the deal agreed to extend the accord until the end of March 2018.
Al-Falih also said his country was united shoulder to shoulder with Russia.
Russian Energy Minister Alexander Novak said: “To reach our goals, to rebalance the market, we must continue to act in a coordinated fashion, to act jointly, which would take us further in 2018.”
Russia and OPEC countries have common goal in terms of the oil market balance, Novak said.
Meanwhile, U.S. oil held steady on Friday after OPEC and other major producers agreed to extend production curbs in a widely expected move aimed at ending a persistent glut in global supplies.
The OPEC and non-OPEC producers led by Russia on Thursday agreed to maintain the output cut until the end of 2018, while also signalling a possible early exit from the deal if the market overheats.
U.S. crude futures were down 2 cents at $57.38 and on Thursday they rose 10 cents or 0.2 percent to $57.40 a barrel. The contract gained about 5.6 percent in November, the third month of gains.
Brent February crude futures rose six cents to $62.69. In the previous session, the most active Brent contract settled up 46 cents or 0.7 percent. Brent rose for a third consecutive month in November, gaining about 3.6 percent.
Analysts said the nine-month extension was already priced in.
The current deal cuts 1.8 million barrels from the market in an attempt to tackle the oversupply and bolster prices.
Saudi oil minister Khalid al-Falih said it was premature to talk about exiting the cuts at least for a couple of quarters as the world was entering a season of low winter demand. He added OPEC would examine progress at its next regular meeting in June.
OPEC and Russia together produce over 40 percent of global oil. Moscow’s first real cooperation with OPEC, put together with the help of President Vladimir Putin, has been crucial in roughly halving an excess of global oil stocks since January.
OPEC is showing “a strong commitment to normalizing inventories and also to remain data dependent, which reduces the risk of both unexpected supply surprises and excess stock draws,” Goldman Sachs said in a note.