OPEC likely to extend production cuts into next year

OPEC likely to extend production cuts into next year

OPEC likely to extend production cuts into next year

According to the latest International Energy Agency (IEA) monthly report, for example, Saudi Arabia over-complied by about 70,000 barrels per day in April, and for the first four months of 2017, four OPEC members have cut by 100 percent or higher versus their agreed amounts.

May 25 OPEC ministers were forced by Texas shale oil producers on Thursday to extend a supply cut into 2018, a regulator from the USA state said.

The decision was announced Thursday in Vienna, Austria at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC). But the hoped-for benefits could be short-lived.

But in the longer term, there are concerns among OPEC countries that higher oil prices may end up being counterproductive as they encourage US shale gas producers to re-enter the market - a development that could weigh on oil prices.

Under the current agreement that started on January 1, OPEC and other producers including Russian Federation pledged to cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year. That helped boost prices, but it also has spurred a big increase in US shale production, with more expected to come on line.

Oil weakened after OPEC was said to agree to extend output cuts for another nine months, disappointing investors who had hoped for more.

Non-Opec oil producers led by Russian Federation later agreed likewise.

Energy ministers from OPEC and other major producers will decide whether to extend production cuts at a meeting in Vienna on Thursday.

Most OPEC ministers including Iraq's have already voiced support for extending cuts by none months.

The survey of the global oil market by Vanguard, yesterday, showed that the prices of some crude oil grades have surged in the market.

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

"We very much are benefitting from the improved oil price, you know it went as low as $28 a barrel".

"For now, several factors are keeping OPEC and non-OPEC countries in market management mode". BMI Research analysts said in a note that a cut extension will mean supplies from the Middle East will remain "constrained", which then, in turn, further opens up strategic market opportunities for U.S. crude.

Amrita Sen of consultancy Energy Aspects said: "If OPEC can ease fears about 2018 balances, that will also help the upside to prices in 2017". Iran's Bijan Namdar Zanganeh floated possible extensions of three months, six months or even a year and said his country had "no difficulty" with any of the options, while Jabbar Ali Hussein Al-Luiebi, his Iraqi counterpart, mentioned "the scenario of a nine-month freeze".

OPEC said its decision is meant to rebalance market conditions and accelerate the draw downs on global crude inventories, which so far has proven to be a hard task.

Decker said she can see prices going up to $60 a barrel in the intermediate term but then retreating a bit.

The Joint Ministerial Monitoring Committee - composed of six Opec and non-Opec countries - agreed in Vienna yesterday to support an extension through March 2018, according to a statement on the producer group's website. Russia, the largest contributor to the agreement that's not a member of OPEC, and Saudi Arabia last week proposed extending the deal for nine months, instead of the six months outlined in the original agreement.

By 1340 GMT on Wednesday, Brent crude was trading broadly flat just above $54 a barrel.

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