Opec strikes deal to cut oil output for nine months
Oil producer nations' cartel Opec decided yesterday in Austria to extend cuts in oil output by nine months to March 2018, delegates said, as the producer group battles a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.
The cuts are likely to be shared again by a dozen non-Opec members led by top oil producer Russia, which reduced output in tandem with the Opec countries from January.
Bord Gáis Energy energy trader Darragh Crowley said the move will lift prices, though not as much as the Opec members want.
"Opec hasn't achieved its stated aim of a global glut of oil inventories back to normal levels - thanks mainly to a resurgent US shale oil industry which has taken up much of the slack in the reduced Opec output. Revenues have improved and money talks," he said.
Opec's cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers.
Many of them rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets. 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.
Yesterday, brent crude oil fell more than 1pc to around $53 per barrel as markets were disappointed Opec would not deepen the cuts or extend them by as long as 12 months.
Opec oil ministers were continuing their discussions in Vienna after three hours of talks.
Non-Opec producers, led by Russia, were scheduled to meet Opec later in the day.
In December, Opec agreed its first production cuts in a decade and the first joint cuts with non-Opec producers in 15 years.
The two sides decided to remove about 1.8m barrels per day from the market in the first half of 2017, equal to 2pc 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. (Reuters)