Oil swings sharply after OPEC indicates 9-month extension to output cuts

Prices swung into negative territory in European trading on Thursday, after being up more than 1% earlier after Saudi Arabia’s energy minister indicated that OPEC will extend its current output-cut deal for a further nine months.

Oil prices fell sharply after Khalid al-Falih said OPEC and non-OPEC producers are likely to rule on extending production cuts for 9 months, but keep them at the same level.

Speaking ahead of a meeting of oil ministers from OPEC and other major producing countries in Vienna on Thursday, the Saudi energy minister added that the consensus is that deeper cuts are not needed now.

The U.S. West Texas Intermediate crude July contract was at $51.05 a barrel by 4:50AM ET (08:50GMT), down 34 cents, or around 0.7%. The U.S. benchmark gained more than 1% to hit its strongest since April 19 at $51.93 in overnight trade.

Elsewhere, Brent oil for July delivery on the ICE Futures Exchange in London shed 18 cents to $53.78 a barrel, pulling back from a session high of $54.66.

In November last year, OPEC and 11 other non-OPE producers, including Russia, agreed to cut output by about 1.8 million barrels per day between January 1 and June 30.

So far, the production-cut agreement has had little impact on global inventory levels due to rising supply from producers not participating in the accord, such as Libya, and a relentless increase in U.S. shale oil output.

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