Sat, Dec 02, 2017 - Page 10 News List

OPEC, allies extend production cut through 2018

‘A GREAT DAY’:‘We are going to be agile,’ Saudi Arabian Minister of Energy and Industry Khalid al-Falih said, as the 24-nation alliance awaits the return of US operators to the market

AP, VIENNA

The OPEC cartel and a group of allied oil-producing nations on Thursday agreed 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 US 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 Minister of Energy and Industry Khalid al-Falih told reporters.

Announcing the extension decision after a day of meetings, he said: “It has 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 US$60 a barrel, depending on the grades, up almost 20 percent from a year ago.

On Thursday, the US contract was trading at US$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.

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,” said Jan Edelmann, an analyst at Germany’s HSH Nordbank AG.

While the prices of US$100 a barrel last seen a little over three years ago appear gone, al-Falih was mindful to address the perception that 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,” al-Falih said.

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, he added.

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. Tensions have spiked in recent months, with the geopolitical struggle potentially exacerbating different positions on oil.

Russian Minister of Energy Alexander Novak, whose country is a key Iran backer, made a comment that could upset Tehran and endanger the tenuous Saudi Arabia-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.

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