OPEC, allies extend production cut through 2018

A worker attaches a poster of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Wednesday, Nov. 29, 2017. With bills rising for gasoline or heating oil, consumers around the world are paying the price for a decision by OPEC and Russia last year to cut production. The strategy is working for those oil-producing nations and will likely be extended at a meeting Thursday. (AP Photo/Ronald Zak)
Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry of Qatar, speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Thursday, Nov. 30, 2017. OPEC and allied oil producing-nations are going into meetings amid apparent consensus on extending their output cuts. (AP Photo/Ronald Zak)
Russian Minister of Energy Alexander Novak arrives for a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Wednesday, Nov. 29, 2017. (AP Photo/Ronald Zak)
Khalid Al-Falih, Minister of Energy, Industry and Mineral Resources and President of the OPEC Conference of Saudi Arabia, speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Thursday, Nov. 30, 2017. OPEC and allied oil producing-nations are going into meetings amid apparent consensus on extending their output cuts. (AP Photo/Ronald Zak)
Iran's Minister of Petroleum Bijan Namdar Zangeneh speaks to journalists prior to the start of a meeting of the Organization of the Petroleum Exporting Countries, OPEC, at their headquarters in Vienna, Austria, Thursday, Nov. 30, 2017. OPEC and allied oil producing-nations are going into meetings amid apparent consensus on extending their output cuts. (AP Photo/Ronald Zak)

VIENNA — The OPEC cartel and a group of allied oil-producing nations agreed Thursday to extend crude output cuts until the end of next year, continuing a policy that led to a significant rise in the price of oil over the past year.

At the same time, the 24-nation alliance led by OPEC member Saudi Arabia and Russia gave notice that it stands ready to revisit the move if price increases bring U.S. shale operators — who suspended operations while crude was cheap — rushing back into the market.

"We are going to be agile, depending on how events unfold," Saudi Arabian oil minister Khalid Al-Falih told reporters. Announcing the extension decision after a day of meetings, he declared, "it's been a great day."

The success of the reduced output strategy has been reflected by crude's rise. Benchmark oil prices are now close to $60 a barrel, depending on the grades, up almost 20 percent from a year ago. On Thursday, the U.S. contract was trading at $57.08 a barrel, down 22 cents on the day.

That partly reflects a rise in global economic growth since last year. But it also has been attributed to the OPEC-led decision to limit production, renewing the cartel's reputation as a major player in controlling the oil market.

After decades of being a dominant force in determining supplies and prices, OPEC's role as a key regulator started fading in recent years, as U.S. shale producers started pumping up their output. That led to oversupply and a steep fall in prices from over $100 to below $40 a barrel by last year, leading to the decision to join key non-OPEC nations and jointly pump less crude.

But the strategy of continued cuts to drive up prices may not be sustainable over the longer run, and OPEC may yet see its influence wane again. With prices now at two-year highs, U.S. producers who mothballed operations when oil was cheap are coming back into the market in force.

U.S. oil producers need relatively higher market prices to break even than, say, Saudi Arabia. So the recent rise is encouraging more to start pumping again.

U .S. crude oil production already has grown by 15 percent since last year to nearly 10 million barrels per day, just behind Russia and Saudi Arabia. The International Energy Agency expects the United States to become the biggest net exporter by the end of the 2020s.

The extra crude is welcome for now, with the global economy booming. But at some point, the balance could again tip from relatively tight supplies to an oversupply, resulting in price drops.

Jan Edelmann, an analyst at Germany's HSH Nordbank, said not only the United States, but Brazil, China and other nations "could have increased incentive at the present price environment to increase their (oil) output."

While the prices of $100 a barrel last seen a little over three years ago appear gone, Saudi Arabia's Al-Falih was mindful to address the perception those rates evoked: that OPEC is interested only in cashing in on pricey crude.

"We are not looking to gouge the market with higher prices," he said, arguing that crude's value had to recover from previous lows to "create a market that is conducive to investment" and OPEC members drilling for more oil.

The extension agreement represented a rare consensus between OPEC kingpin Saudi Arabia and Iran. Jockeying for Middle East dominance between the two countries has led to disarray in the past. The tensions have spiked in recent months, with the geopolitical struggle potentially exacerbating different positions on oil.

The Saudis came to the OPEC meetings favoring continued cuts, but Iran wants greater market share as it claws its way back from the more than a decade of economic sanctions that were lifted as part of its 2015 nuclear deal with six world powers.

Russian Energy Minister Alexander Novak, whose country is a key Iran backer, made a comment that could upset Tehran and endanger the tenuous Saudi-Iran balancing act at future OPEC meetings.

Novak said the relationship between Moscow and Riyadh "is developing faster than ever" on oil issues, as well as on other projects.

Must Read

Yazidi activist weary after years of anti-IS...

May 22, 2017

Yazidi activist Nadia Murad says her work speaking out against the Islamic State group has left her...

Dispute at German club leaves worker, gunman dead

Jul 30, 2017

A disagreement in a German discotheque turns deadly after operator's son-in-law returns with an...

Austrian voters concerned about immigration, Islam

Oct 14, 2017

After bruising political campaigns, Austrian political parties are heading into an election that...

OPEC and allies likely to extend production cuts...

Nov 29, 2017

OPEC and allied oil producing-nations appear ready to agree to extend their output cuts at a...

New Austrian leader rejects talk of eastern EU...

Jan 5, 2018

Austria's new chancellor is rejecting suggestions that his government will ally broadly with...

People also read these

Trump: Fate of Iran nuclear deal hangs on tough...

Sep 18, 2017

U.S. President Donald Trump is warning that Washington will walk away from a nuclear deal it agreed...

'Burqa ban' law signals rightward political turn...

Sep 30, 2017

A law prohibiting full face coverings _ known popularly as the "Burqa Ban" _ portends political...

OPEC and allies likely to extend production cuts...

Nov 29, 2017

OPEC and allied oil producing-nations appear ready to agree to extend their output cuts at a...

OPEC, allies extend production cut through 2018

Nov 30, 2017

Oil ministers from OPEC cartel and group of non-OPEC partners agree to extend crude output cuts...

The Latest: OPEC, allies extend oil output cuts...

Nov 30, 2017

OPEC oil ministers and their non-OPEC partners have agreed to extend crude output cuts until the...

Weather, 20 December
Houston Weather
+7

High: +11° Low: -2°

Humidity: 83%

Wind: NNE - 7 KPH

Canberra Weather
+27

High: +27° Low: +17°

Humidity: 87%

Wind: W - 20 KPH

Roissy-en-France Weather
+6

High: +6° Low: -5°

Humidity: 87%

Wind: ENE - 7 KPH

Florence Weather
+9

High: +9° Low: +6°

Humidity: 97%

Wind: ENE - 17 KPH

Parga Weather
+7

High: +16° Low: +4°

Humidity: 100%

Wind: SE - 25 KPH

About Us

24-7 Reporters publishes up-to-the-minute news 24 hours a day, 7 days a week. Our certified reporters are among the most experienced, well-trained and talented across the globe, covering issues resonating progressives in every corner of the world.

Contact us: sales@reporterscom.com