The Organisation of the Petroleum Exporting Countries (Opec) has agreed to extend oil production cuts with Russia and other non-Opec producers until the end of 2018.
Under the deal, which started at the beginning of 2017 and was set to run until March 2018, producers are cutting production by 1.8m barrels per day (bpd) to bolster oil prices by clearing the global supply glut.
Ahead of the cartel's meeting with allies in Vienna today, Saudi energy minister Khalid al-Falih said he was in favour of extending cuts by nine months until the end of 2018 and added that it was too early to talk about exiting the cuts. He said the deal would be reviewed at the cartel's next meeting in June.
“When we get to an exit, we are going to do it very gradually ... to make sure we don’t shock the market,” he said.
Brent crude oil prices reached as high as $64 a barrel while talks were ongoing, but they tapered off somewhat after the announcement.
“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,” said Chris Beauchamp, market analyst at IG.
Mihir Kapadia, chief executive and founder of Sun Global Investments, said:
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 per cent 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.”