OPEC, al­lies to ex­tend oil cuts for nine months


OPEC and its al­lies ex­tended oil pro­duc­tion cuts for nine more months af­ter last year’s land­mark agree­ment failed to elim­i­nate the global over­sup­ply or achieve a sus­tained price re­cov­ery.

The pro­ducer group to­gether with Rus­sia and other non-mem­bers agreed to pro­long their ac­cord through March, Bi­jan Nam­dar Zan­ganeh, Iran’s min­is­ter of petroleum, said in Vi­enna. No new nonOPEC coun­tries will be join­ing the pact, ac­cord­ing a del­e­gate fa­mil­iar with the mat­ter, who asked not to be iden­ti­fied be­cause the in­for­ma­tion isn’t pub­lic.

Six months af­ter form­ing an un­prece­dented coali­tion of 24 na­tions and de­liv­er­ing out­put re­duc­tions that ex­ceeded all ex­pec­ta­tions, resur­gent pro­duc­tion from U.S. shale fields has meant oil in­ven­to­ries re­main well above the level tar­geted by OPEC min­is­ters. While stock­piles are shrink­ing, min­is­ters ac­knowl­edged that the sur­plus built up dur­ing three years of over­pro­duc­tion won’t clear un­til at least the end of 2017.

Saudi oil min­is­ter Khalid Al-Falih said Thurs­day that the cuts are work­ing, stock­pile re­duc­tions will ac­cel­er­ate in the third quar­ter and in­ven­tory lev­els will come down to the five-year av­er­age in the first quar­ter of next year. While he ex­pects a “healthy re­turn” for U.S. shale, that won’t de­rail OPEC’s goals and a nine-month ex­ten­sion will “do the trick.”

“We must com­plete our mis­sion to­day,” said Rus­sian en­ergy min­is­ter Alexan­der No­vak, adding that the agree­ment was work­ing de­spite skep­ti­cism.

OPEC agreed in Novem­ber to cut out­put by about 1.2 mil­lion bar­rels a day. Eleven non-mem­bers joined the deal in De­cem­ber, bring­ing the to­tal sup­ply re­duc­tion to about 1.8 mil­lion. The curbs were in­tended to last six months from Jan­uary.

How­ever, con­fi­dence in the deal waned as in­ven­to­ries re­mained stub­bornly high and U.S. out­put surged.


Saudi oil min­is­ter Khalid Al-Falih speaks to jour­nal­ists be­fore the start of an OPEC meet­ing in Vi­enna on Thurs­day.

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