OPEC and Russia agree to extend oil output cuts until the 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 Al-Falih said sitting next to his Russian counterpart Alexander Novak at a press conference after the meeting.

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 for a further nine months, 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.”

Benchmark Brent crude traded up 0.4 per cent at US$63.36 a barrel at 6:33 p.m. in London. West Texas Intermediate crude 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 than most OPEC members because its economic policy making is more complex.

It would be premature to talk about an exit strategy because OPEC and its allies are relying on oil demand in the third quarter of 2018 to finally eliminate the inventory surplus, Saudi Oil Minister Khalid Al-Falih said Thursday before the meeting.