Wednesday, 23 January, 2019

OPEC extends oil supply curbs as glut persists

Nellie Chapman | 04 June, 2017, 05:48

The Organization of the Petroleum Exporting Countries (OPEC) reached a deal with Russian Federation and other major producers on Thursday to prolong output cuts for nine months until the end of March 2018.

The agreement hammered out in Vienna on Thursday will see the 1.8m barrel a day cuts, first agreed in November, extended to the end of the first quarter of 2018.

The next Opec and non-Opec meeting is scheduled for Nov 30, delegates said.

Al-Falih said that the cuts had achieved a key aim.

The U.S. benchmark gained more than 1% to hit its strongest since April 19 at $52.00 in overnight trade. The price of West Texas Intermediate oil, the USA benchmark crude, declined 3.8% to $49.39 at 1:06 p.m.

The Opec also faces the dilemma of not pushing oil prices too high because doing so would further spur shale production in the United States, the world's top oil consumer, which now rivals Saudi Arabia and Russian Federation as the world's biggest producer.

OPEC sources have said the Vienna meeting would highlight a need for long-term cooperation with non-OPEC producers.

"I never worry about the daily reaction of the market", he told reporters.

More than 400 oil rigs are now working USA shale fields - an increase of more than 120 per cent compared with a year ago.

It made the decision to cut production in the hopes of tackling a major global glut which had pushed the price of oil down to less than half of its mid-2014 level. But an increase to current reductions of 1.8 million barrels a day could push Brent toward $60 by year-end. And U.S. producers are poised to expand more, even if prices tick upward only moderately as a result of the oil-cut extension by OPEC and its partners.

"This offsets almost half of OPEC's production cuts", it noted.

OPEC also faces the dilemma of not pushing oil prices too high because doing so would further spur shale production in the United States, the world's top oil consumer, which now rivals Saudi Arabia and Russian Federation as the world's biggest producer.

While many investors said they were reluctant to bet against oil prices falling ahead of the meeting, they rushed to get out after they sensed that momentum had shifted violently to the down side.