OPEC has agreed to extend its production cuts for an additional nine months through to the first quarter of 2018.
At the 172nd meeting of the OPEC conference, members agreed to implement the Joint OPEC-Non-OPEC Ministerial Monitoring Committee’s (JMMC) recommendation to continue the production adjustments for another nine months, starting July 1 2017.
All OPEC and participating non-OPEC producing countries have achieved a conformity level of 102% since the cap was introduced at the beginning of the year. The JMMC said it was a demonstration of the commitment of participating countries to continue their cooperation until the achievement of the goal of rebalancing the market.
The committee however said that given current market conditions, including the level of global inventories, it is necessary to extend the production cap.
HE Khalid A. Al-Falih, president of the OPEC conference, said in an opening address that since November the oil market situation has markedly improved.
‘We started with a bearish sentiment, but the market is now well on its way toward rebalancing. We have more work to do in lowering inventories toward the last five-year average, but we are on the right track.
‘Stakeholders across the spectrum are benefitting from the improved situation – not only the producers who are part of the supply agreement but other countries as well. Investment flows into the upstream sector have picked up, albeit at a slower pace than required to meet forecast long-term demand. And despite potential volatility, I expect the situation to continue improving, assisted by a more robust global economy and higher GDP growth in 2017, as well as fairly healthy oil demand growth this year, particularly in Asia.’
Following the decision, Ann-Louise Hittle, Wood Mackenzie’s vice president, research macro oils, says: ‘OPEC’s decision is a big one because it shows a commitment to support oil prices into 2018 – and potentially for all of next year.
‘A firmer oil price will, we expect, further support the US tight oil industry into 2018. The extension through to the first quarter of 2018 makes it clear to the oil market that OPEC intends to continue to support oil prices at the expense of market share, at least for the time being.’