The members of the Organisation of the Petroleum Exporting Countries (OPEC) agreed yesterday to extend the current cut in oil production until the end of 2018. The agreement was reached during the 173rd OPEC meeting which was held at the organisation’s headquarters in Vienna.
OPEC members were joined at the meeting by Russia and non-OPEC producers. OPEC and Russia together are responsible for over 40 per cent of global oil production.
On 1 December 2016, the 14-member OPEC cartel, Russia and nine other global oil producers agreed to reduce oil production to 1.8 million barrels per day (bpd). The initial agreement was due to end in March next year, having already been extended once. Since mid-2017, crude oil prices have risen by 40 per cent following the agreement.
Rather than extending the deal by nine months, the group agreed to implement a new deal that will last from January to December 2018. The producers will review the deal at the next OPEC meeting in June to assess what impact it is having on oil prices and global crude stockpiles.
They also decided to cap the combined output of Nigeria and Libya at 2017 levels, below 2.8 million bpd. Both countries have been exempt from cuts due to unrest and lower than normal production.
Saudi Energy Minister and the current OPEC president, Khalid Al-Falih, said it was premature to talk about abandoning the cuts for at least a couple of quarters as the world is entering a season of low winter demand. “When we get to an exit point,” he explained to journalists, “we are going to do it very gradually… to make sure we don’t shock the market.”
While the meeting was taking place, Brent crude for February delivery was up 77 cents reaching $63.30 per barrel. In addition, US light crude for February delivery rose 60 cents, reaching $57.96 a barrel.