OPEC and non-OPEC producers extend supply pact agreement into 2018 - delegates

25 May 2017 16:15 Source:ICIS News

Mint Images/REX/ShutterstockLONDON (ICIS)--OPEC will extend its production-curbing agreement into 2018, according to reports, citing delegates at a meeting of the cartel in Vienna on Thursday.

No official line from OPEC has yet been published but confirmation of a nine-month extension is expected to be announced once the long-awaited discussions have ended, while talks with non-OPEC producers, that were part of the initial November 2016 global supply cut pact, are set for later today.

In middle trading session, Brent was down 61 cents to $53.35 and remained range-bound, as market bulls showed disappointment about the OPEC’s non-commitment towards longer and deeper production cuts.

Despite a growing analysts’ consensus over the shortfalls of a dry, nine-month extension, Saudi energy minister Khalid al Falih deemed a deepening of those cuts unnecessary.

Kazakhstan will be part of the extended round, along with the other eleven non-OPEC producers - including Russia - that joined the organisation’s effort to keep a lid on the global oil supply and prevent a price collapse last November.

Kazakh energy minister Kanat Bozumbayev said before the meeting that his country was keen to contribute to the reduction, indicating that its prolific Kashagan field would not reach a 370,000 bbl/day output by the end of 2017 as originally planned.

US shale production, however, will remain untied by OPEC’s decision, the US remaining adamant about exempting themselves from any collective supply agreement, prompting doubts about the lasting effect of the extension and more uncertainty about the reaction of American oil producers.

Some analysts observed that beyond slowing the market's rebalancing, incremental barrels from either the US or from other exempted countries like Nigeria and possibly Libya may jeopardise OPEC’s own efforts and eventually tip the markets back into oversupply as early as mid-2018.

By Julien Mathonniere