28 May, 2017
The OPEC ministers said they would cut supply by 1.8 million barrels a day from the market during their meeting on Thursday in Vienna.
The agreement, which is expected to be ratified later today by Russian Federation and other producers outside Opec, will see the 1.8 million barrel a day accord first agreed in late November extended to March 2018.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were back below $50, at $48.61, down 29 cents, or 0.6 percent.
Both benchmarks were still up over 15 percent from May lows. Since then, trading has been volatile.
Those falls reflect disappointment from some market participants that the cartel has decided not to deepen the cuts or extend them by more than the expected nine months. OPEC's move was greeted by a sell-off. She argues that OPEC's attempts to strengthen crude prices by cutting production "won't work with high US inventories".
"It's all gone as expected", Bob Yawger, director of the futures division at Mizuho Securities USA Inc in NY, said by telephone.
The first agreement to cut production was achieved last December during an OPEC summit in Vienna.
The agreement will need to be ratified by non-OPEC producers during the meeting with their OPEC counterparts later today in order to rollover the agreement, reached in November a year ago, for another nine months until March 2018.
Nigeria and Libya will remain exempt from making cuts and Iran, which was allowed to increase production under the original accord, retains the same output target, he said after the meeting.
"We considered various scenarios, from six to nine to 12 months, and we even considered options for a higher cut. But all indications discovered that a nine-month extension is the optimum", Saudi Energy Minister Khalid al-Falih said.
With a production of around 300,000 barrels per day, the Central African country is one of OPEC's smallest oil producers, OPEC statistics show. The global supply swamp has depressed markets since 2014. And US producers are poised to expand more.
The energy minister said the OPEC Monitoring Committee proposed to extend the agreement for another nine months and the proposal was unanimously accepted.
United States oil production has already risen by 10 per cent since mid-2016 to over 9.3 million bpd, close to the output of top producers Russian Federation and Saudi Arabia.
USA oil production has already risen by more than 10 percent since mid-2016 to more than 9.3 million bpd, and OPEC's contribution to the cuts - 1.2 million bpd - could be completely eaten up by rising US production by year-end, according to RBN Energy.
OPEC and 10 non-OPEC oil producing nations, led by Russian Federation, announced that they are extending cuts in oil output by nine months.
Falih is not anxious that higher oil prices helped rival shale oil producers in the United States to increase their output and slow down the reduction in inventories.
