OPEC extends output cut, but big oil price increase unlikely

Hence, the oil market is disappointed that OPEC did not deliver more today, either in terms of deeper production cuts or a longer extension.

Oman, the largest non-OPEC producer in the region supports to extend the agreement and will continue to cut production by almost 4.5 per cent if the deal goes through.

On Thursday, the Opec agreed to keep its own cuts of around 1.2 million bpd in place for nine months, Kuwaiti oil minister Essam Al Marzouq said.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.87, up 51 cents, or 1 percent. Brent crude oil, the Global benchmark, also dipped to $51.71 or 4%.

Nigeria's Senate passed the first part of long-awaited legislation to overhaul the country's energy industry on Thursday.

By keeping production at about 1.8 million barrels a day lower than late 2016's levels, the group is suppressing about 2 percent of global supply.

Should the meeting in Vienna result in a cut extension to cover all of 2018, Wood Mackenzie said the tighter market could push average 2018 Brent prices up to $63 per barrel.

He added that the price fall on May 25 "was probably triggered" by "imbalances" in the market with some expecting deeper cuts to OPEC production.

Less oil on the market normally means higher value per barrel.

"I think nine months is most likely", said one of the OPEC delegates and four others agreed to it.

Led by Russian Federation, non-OPEC producers had initially curbed output in conjunction with OPEC in a landmark deal for the first half of the year from January.

"If U.S. shale producers exceeded our projected increases, it'll drive the price down again", Arrington said.

OPEC does not have plans to impose restrictions on oil extraction in Libya and Nigeria in the nearest future, al-Falih stated, as the two countries' production does not affect the plan to reduce global oil stocks.

Rising U.S. production may continue to offset OPEC's cuts, even though refining runs have touched record levels in the United States in recent weeks. Nigeria being now exempt from the cut measure needs to ramp up its production to get out recession.

Latest News