By Salma El Wardany, Fred Pals and Julian Lee
Opec will extend production cuts into 2020 as the worlds leading oil exporters fret about a weakening outlook for global demand growth and the relentless rise in output from Americas shale fields.
Ministers from the group meeting in Vienna agreed to prolong their supply curbs by another nine months, said delegates, asking not to be named because the talks were ongoing. The decision still needs to be ratified by non-OPEC allies on Wednesday, but several of those nations, most notably Russia, have already given their approval.
Originally envisioned as a short-term fix in 2017 to drain excess global stockpiles, the repeated decisions to keep rolling the cuts forwards shows the challenge of controlling the oil market in the age of shale. While the strategy has succeeded in raising prices, the Organization of Petroleum Exporting Countries share of the global oil market has fallen to the lowest since 1991.
Oil prices responded positively to the idea of a longer extension. Benchmark Brent crude futures in London rose 0.8% to $66 a barrel as of 2:58 p.m.
“The market is going to like the nine months extension,” Mohammad Darwazah, oil analyst at consultant Medley Global Advisers, said in Vienna before the agreement. “Everyone now is realizing that in 2020 supply growth will exceed demand growth. And the Saudis and the Russians are trying to get ahead of that situation.”
By pushing to extend the cuts until March 2020, Saudi Arabia is trying to avoid cliffhanger meetings, when the group gathers only days — or even hours — before a round of curbs expire, according to an OPEC delegate briefed on the strategy. OPEC will meet before the end of the year, perhaps in December, giving the cartel a cushion of several months between its next meeting and the end of the agreement.
For Moscow, theres an extra incentive to extend the curbs by nine months as Russian oil companies struggle to raise production over the winter. By extending the deal into 2020, Russia could be in a better position to pump more during the spring of next year. The idea of a longer-than-expected extension was first Read More – Source