OPEC, Russia to extend oil cuts

Curtailed output to continue until end of 2018

VIENNA • OPEC and its allies outside the group agreed to maintain oil production cuts until the end of 2018, extending their campaign to wrest back control of the global market from America’s shale industry.

After a day of talks in Vienna, the decision showed the strength of the unprecedented alliance between the world’s top two oil producers, Saudi Arabia and Russia, and confounded Wall Street analysts who predicted Moscow would be reluctant to keep going. The deal was even beefed up through the inclusion of Nigeria and Libya, two members of the Organization of Petroleum Exporting Countries originally exempted from the curbs.

“We are united, shoulder to shoulder,” Saudi Arabian Energy Minister Khalid AlFalih said sitting next to his Russian counterpart Alexander Novak at a press conference after the meeting. “We are completely aligned.”

Since the pact started a year ago, global inventories have fallen and prices risen by more than US$20 a barrel, but in rare display of unanimity at an OPEC meeting ministers agreed the job wasn’t yet complete. By keeping the 1.8 million barrels a day of cuts in place, the oil producers aim to return stockpiles to their five-year average without overheating the market and eliciting a new flood of shale oil.

“Fundamentally, the cuts have worked well,” Patrick Pouyanne, chief executive of French oil major Total SA, said at a press briefing in Antwerp. “I’m not surprised they decided to extend. ”

Libya and Nigeria, previously exempt from cutting production due to internal strife, agreed to a collective cap on their output that exceeds the nations’ current production, according to Iranian Oil Minister Bijan Namdar Zanganeh. To accommodate the two new countries the existing deal will run for twelve months from January to December.

Brent crude traded up 0.4 per cent at US$63.36 a barrel at 6:33 p.m. in London. West Texas Intermediate was down slightly.

Before the meeting, Russia had sought assurances on how and when the agreement would be phased out, people involved in negotiations said earlier this week. The country needs greater clarity because its economic policy-making is more complex, including a floating exchange rate that fluctuates with the oil price.

Nigeria and Libya agreed to a collective output cap of 2.8 million barrels a day. Nigeria pumped 1.73 million barrels a day in October and Libya 980,000 a day, according to Bloomberg.