OPEC extends oil output cut by nine months to fight glut
OPEC decided on Thursday to extend cuts in oil output by nine months to March 2018 as the producer group battles a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.
The extended reductions are likely to be carried out once again in tandem with a dozen non-members led by top oil producer Russia, which reduced output with the Organization of the Petroleum Exporting Countries from January.
OPEC’s cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.
Oil’s earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.
The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing with global crude stocks still near record highs.
By 1430 GMT (10:30 a.m. ET), Brent crude was 0.7 percent down at around $53.50 per barrel, having pared earlier losses after OPEC said it would not deepen the cuts or extend them by as long as 12 months. [O/R]
In December, OPEC agreed its first production cuts in a decade and the first joint cuts with non-OPEC producer nations, led by Russia, in 15 years. The two sides decided to remove about 1.8 million barrels per day (bpd) from the market in the first half of 2017 – equal to 2 percent of global production.