OPEC, Russia boost oil alliance
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’d 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 meet- ing. “We are completely aligned.”
Since the pact started a year ago, global inventories have fallen and prices rose by more than $20 a barrel, but in a 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 officer of French oil major Total SA, said at a press briefing in Antwerp. “I’m not surprised they decided to extend.”
OPEC’s evolving view of the oil market supported a full year extension. Until last week, OPEC’s internal analysis concluded that stockpiles would be back in line with the five-year average in the third quarter of 2018. At the meeting on Tuesday of the Joint Technical Committee — of- ficials from OPEC and nonOPEC nations that monitor the cuts— that key datewas pushed back to the end of the third quarter or the start of the fourth, said people familiar with the deliberations.
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 newentrants, the existing deal will be reset to run for twelve months from January to December, delegates said.
“The most positive surprise is the inclusion of Libya and Nigeria in the deal and it removes uncertainty about supply in 2018,” said Jan Edelmann, an analyst at HSH Nordbank in Hamburg.
Brent, the international benchmark crude, settled up 0.7 percent to $63.57 a barrel on Thursday. West Texas Intermediate, the U.S. benchmark, settled up 0.2 percent to $57.40.