OPEC extends cuts in oil output by nine months

The world's oil exporters meet in Vienna to decide how to reduce output, as falling prices continue to hurt economies.

    The Organization of Petroleum Exporting Countries has decided to extend cuts in oil output by nine months until March 2018.

    The decision comes as the producer group battles a global excess of crude that has seen prices halve and revenues drop sharply in the past three years.

    OPEC oil ministers discussed the developments on Thursday in Vienna, Austria.

    The cuts are likely to also be implemented by a dozen non-members led by Russia, which has reduced output in tandem with OPEC since January.

    OPEC's cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

    WATCH: Can OPEC still control the oil market?

    Oil's earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.

    The price rise this year has spurred growth in the US shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global crude stocks still near record highs.

    In December, OPEC agreed its first production cuts in a decade and the first joint cuts with non-OPEC, led by Russia, in 15 years.

    The two sides decided to remove about 1.8 million barrels per day from the market in the first half of 2017, equal to two percent of global production.

    Despite the output cut, OPEC kept exports fairly stable in the first half of 2017 as its members sold oil from stocks.

    OPEC struggles to maintain dominance - Counting the Cost

     

    The move kept global oil stockpiles near record highs, forcing OPEC first to suggest extending cuts by six months, but later proposing to prolong them by nine months and Russia offering an unusually long duration of 12 months.

    "There have been suggestions [of deeper cuts]. Many member countries have indicated flexibility but...that won't be necessary," Khalid al-Falih, Saudi energy minister, said before the meeting.

    He said OPEC members Nigeria and Libya would still be excluded from cuts as their output remained curbed by unrest.

    Falih also said Saudi oil exports were set to decline steeply from June, thus helping to speed up market rebalancing.

    OPEC sources have said the Vienna meeting would highlight a need for long-term cooperation with non-OPEC producers.

    The group could also send a message to the market that it will seek to curtail its oil exports.

    Saudi Arabia steps up efforts to reduce global oil supply

    "Russia has an upcoming election and Saudis have the Aramco share listing next year so they will indeed do whatever it takes to support oil prices," Reuters news agency quoted Gary Ross, head of global oil at PIRA Energy, as saying.

    OPEC has a self-imposed goal of bringing stocks down from a record high of 3 billion barrels to their five-year average of 2.7 billion.

    "We have seen a substantial drawdown in inventories that will be accelerated," al-Falih said. "Then, the fourth quarter will get us to where we want."

    OPEC also faces the dilemma of not pushing oil prices too high because doing so would further spur shale-oil production in the US, the world's top oil consumer.

    The US now rivals Saudi Arabia and Russia as the world's biggest producer.

    Al Jazeera's Sonia Gallego, reporting from Vienna, said that "although [US shale production] has evolved from what it was years ago - it has had to cut back and reinvent itself - the Saudis have maintained that that level of production is not going to affect OPEC."

    SOURCE: Al Jazeera and news agencies


    YOU MIGHT ALSO LIKE

    Interactive: Coding like a girl

    Interactive: Coding like a girl

    What obstacles do young women in technology have to overcome to achieve their dreams? Play this retro game to find out.

    Why America's Russia hysteria is dangerous

    Why America's Russia hysteria is dangerous

    The US exaggerating and obsessing about foreign threats seems quite similar to what is happening in Russia.

    Heron Gate mass eviction: 'We never expected this in Canada'

    Hundreds face mass eviction in Canada's capital

    About 150 homes in one of Ottawa's most diverse and affordable communities are expected to be torn down in coming months