By Priwo [CC-BY-SA-3.0] via Wikimedia Commons
The Organisation of the Petroleum Exporting Countries (Opec) has agreed to continue oil production reductions with Russia and other non-Opec producers until the end of next year.
Under the said deal, which began at the beginning of this year and was scheduled to run until March of next year, producers are reducing production by 1.8m barrels per day (bpd) to sustain oil prices by clearing the glut on global supply.
Opec has also determined to cap the output of Libya and Nigeria, both of which were previously exempted from the cuts.
Before the meeting of the cartel with allies in Vienna, Khalid al-Falih, the Saudi energy minister, said that he was in favour of extending cuts by nine months until the end of next year. He said that it was too early to discuss regarding the end of the cuts. He said that the deal would be analysed at the next meeting of the cartel that is scheduled in June.
The energy minister said: “When we get to an exit, we are going to do it very gradually … to make sure we don’t shock the market.”
Brent crude oil prices were priced as high as $64 per barrel while discussions were ongoing. However, they tapered off somewhat after the said announcement.
A market analyst at IG, Chris Beauchamp, said: “Opec’s decision to extend output cuts into 2018 was met by a giant shrug from oil traders, who had priced in this already. Oil demand does look much healthier, and doubtless, more than a few Opec members will be hoping Russia continues to press its case for an earlier end to cutbacks in order to avoid letting US shale producers reap all the benefits.”
The chief executive and founder of Sun Global Investments, Mihir Kapadia, stated: “With Saudi Arabia, the de-facto leader of the cartel, and Iraq giving vocal support for the necessity of extending the cutback, it seemed to be only a formality before the rest of the members and partners agreed to the extension.
“Brent crude has gained more than 1.4 percent today surpassing the $64 mark, and oil producers will certainly hope for it to reach the $70s soon. This is very much possible, only if Opec and its partners remain committed for another year.”