At a ministerial conclave in Vienna on 30th November, OPEC and some non-OPEC oil ministers agreed to extend production cuts, totalling 1.8 mbd, through to the end of 2018, in a bid to tackle a global glut of crude oil and keep prices buoyant. Following the deal, which ministers hailed as historic and unprecedented, the price of Brent stood at $63.28 a barrel, up 0.27% on the day. WTI crude rose by 10 cents to $57.40.
The extension will be reviewed in June to assess whether the glut of oil on world markets is on track to come back down to a five-year average.
Alexander Novak, the Russian energy minister, said: “To reach our goals, to rebalance the market, we must continue to act in a coordinated fashion, to act jointly, which would take us further in 2018 [with cuts].”
Saudi oil minister Khalid al-Falih Falih said that OPEC was aware of the risk of a resurgent US shale oil industry, and the group would be “agile” in responding. However, he downplayed shale’s impact, saying US oil production this year had been moderate. The number of US oil rigs has leapt by more than a third since a year ago, when OPEC and Russia first agreed to curtail production.
Oil analysts Wood Mackenzie said stakes had been high for OPEC and Russia, but the production cut decision means global oil supply and demand will come closer into balance in the second half of 2018, and prices would go higher at the same time.
December 1, 2017