Finance

OPEC Extends Oil Output Cut By 9 Months

OPEC Extends Oil Output Cut By 9 Months

On Thursday, the Opec agreed to keep its own cuts of around 1.2 million bpd in place for nine months, Kuwaiti oil minister Essam Al Marzouq said. "Everyone is in agreement", he said. Before November 2016, the cartel also included Indonesia, but its membership was suspended, as the country did not comply with the status of a net oil exporter.

OPEC and other oil-producing nations have extended their output cuts for an additional nine months in an effort to shore up prices.

With U.S. output rising steadily and OPEC and its allies potentially ramping up production in 2018 to regain lost market share, many traders are already expect another price slump. "Nine months with the same level of production that our member countries have been producing at is a very safe and nearly certain option to do the trick". With prices above $50 from lows of past year, they are increasingly moving back into the market.

Nigeria, Africa's largest economy, relies on oil proceeds as its main revenue source.

The agreement between OPEC and non-OPEC countries would be impossible without Russian Federation, al-Falih told reporters after the press conference.

Investors seemed to focus on that reality on Thursday, when they pushed the price of crude to levels seen before OPEC's meeting in November.

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The decision to maintain the production cuts for nine months was unanimously approved by the Vienna agreement signees, Novak stressed. That's because USA shale oil producers have taken advantage of the uptick in prices since previous year to ramp up production.

US oil production C-OUT-T-EIA has already risen by more than 10 percent since mid-2016 to more than 9.3 million bpd as drillers take advantage of higher prices and the supply gap left by OPEC and its allies.

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.

"The U.S. shale producer does what everyone thought was impossible".

Brent crude oil prices have rallied from lows of below $48 per barrel in the first week of May.

"What we didn't need was volatility, we need much more stability which the OPEC deal has given us", the minister said.


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