KUWAIT, LONDON
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, said Bijan Namdar Zanganeh, Iran’s Minister of Petroleum. No new non-Opec 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 expectations, some of the world’s largest oil producers have faced the fact that they’ve fallen short of their goal. 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 on Thursday that the cuts are working, saying 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 US shale, that won’t derail Opec’s goals and a nine-month extension will “do the trick,” he said.
The Organisation of Petroleum Exporting Countries 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, but confidence in the deal, which boosted prices as much as 20 per cent, waned as inventories remained stubbornly high and US output surged.
Opec agreed earlier Thursday to prolong their own output cuts by nine months. Nigeria and Libya will remain exempt from making cuts and Iran, which was allowed to increase production under the original accord, retains the same output target, Kuwait’s Oil Minister Essam Al Marzooq said after the meeting.
