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.