Delegates: OPEC agreed to extend production cuts for 9 months and Allaibi: It is the best choice
economy Since 2017-05-25 at 16:41 (Baghdad time)
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OPEC decided on Thursday to extend oil production cuts by nine months to March 2018 as it faces a global oil supply gap after halving prices and falling revenues sharply in the last three years, Opec delegates said.
Some 10 non-member countries, led by Russia, the world's biggest oil producer, are likely to share cuts as they did in conjunction with the Organization of Petroleum Exporting Countries (OPEC) since the beginning of January.
OPEC cuts helped bring oil prices back above $ 50 a barrel this year, giving a boost to producers, many of whom rely heavily on energy revenues and have been forced to withdraw from foreign exchange reserves to fill gaps in their budgets.
Oil Minister: It's the perfect choice
Iraqi Oil Minister Jabbar Ali al-Allaibi said on Thursday that extending the current OPEC-led supply cut for nine months was the best option to restore balance in the crude market.
The minister added that another proposal was to extend the agreement by nine months while deepening the cuts.
Not only the Libyan who wants to do so His Kuwaiti counterpart Oil Minister Essam al-Marzouq said on Thursday he did not expect OPEC oil producers to discuss any deepening of the goal of reducing oil production at a meeting whose agenda includes extension of the agreement.
Al-Marzouq told reporters ahead of the meeting that the oil market had already absorbed the increase in oil production and that it expected to extend the production cut-off agreement by 1.8 million bpd in the first half of 2017, with 22 products participating for an additional nine months.
The fall in oil prices, which began in 2014, has forced Russia and Saudi Arabia to austerity and led to unrest in some producing countries such as Venezuela and Nigeria.
This year's price hike has encouraged US oil production to increase non-participation in the production agreement, curbing market recovery to keep global crude stocks near record highs.
By 11:30 GMT, Brent crude fell 1.3 percent to around $ 53 a barrel as the marketers were disappointed with the market's rise because of OPEC's reluctance to deepen the cuts or extend them to 12 months.
OPEC oil ministers are continuing their discussions in Vienna and are scheduled to meet with independent producers later in the day.
OPEC agreed in December on its first production cut in 10 years and the first joint cuts with Russian-led independent producers in 15 years. The two sides agreed at the time to cut production to around 1.8 million bpd in the first half of 2017, equivalent to 2 percent of world production.
Despite production cuts, OPEC kept its exports largely stable in the first half of this year as producers sold out of stocks.
The move kept global oil inventories near record highs, forcing Opec to propose a six-month extension, but later proposed a nine-month extension, and Russia even proposed a 12-month extension.
"There are proposals (to deepen the cuts) and many countries have shown flexibility but ... that will not be necessary," Saudi Energy Minister Khalid al-Falih said before the meeting.
Exemption of Nigeria and Libya
OPEC member Nigeria and Libya will continue to be exempted from cuts as unrest continues to curb production, Faleh said.
He also pointed out that oil exports are going to drop significantly starting in June, which will help accelerate the pace of rebalancing the market.
OPEC sources said today's meeting would highlight the need for long-term cooperation with non-member producers.
The organization may also send a message to the market that it is seeking to reduce its oil exports.
Delegates confirmed that the organization had already agreed to continue Nigeria's exclusion from reducing oil production
"Russia has an impending election and the Saudis will have to include Aramco next year, so they will in fact take any steps to support oil prices," said Gary Ross, oil official at Standard & Poor's Global Plata.
OPEC aims to cut stocks from its record high of 3 billion barrels to a five-year average of 2.7 billion.
"We have seen a significant decline in inventories, which will accelerate, and then we will achieve what we are looking for in the fourth quarter," he said.
OPEC also faces the dilemma of not pushing prices to too high levels, as this would encourage increased rock production in the world's top oil consumer, which now rivals Saudi Arabia and Russia as the world's top crude producer.
"The 9-month extension is not enough under the current rock oil trend," said Jimmy Webster, oil director at Boston Consulting Group,
The Organization is discussing on Thursday the inclusion of Nigeria in the agreement to reduce oil production.
Nigeria and Libya are plagued by unrest and are barred from production constraints agreed between OPEC and non-member producers in December and will run from January to June 2017.
Saudi Energy Minister Khalid al-Faleh said earlier in the day that there are no plans to impose restrictions on Nigerian or Libyan production. Nigeria's production has increased in recent months after the resumption of production from several fields.
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