OPEC, non-OPEC extend oil output cut by nine months to fight glut
By Alex Lawler, Rania El Gamal and Ernest Scheyder
VIENNA (Reuters) - OPEC and non-members led by Russia decided on Thursday to extend cuts in oil output by nine months to March 2018 as they battle a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.
Oil prices dropped more than 4 percent as the market had been hoping oil producers could reach a last-minute deal to deepen the cuts or extend them further, until mid-2018. [O/R]
OPEC's cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.
Oil's earlier price decline, which started in 2014, forced Russia and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.
The price rise this year has spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global crude stocks still near record highs.
"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.
He told a news conference he was not worried by what he called Thursday's "technical" oil price drop and was confident prices would recover as global inventories shrink, including because of declining Saudi exports to the United States.
In December, the Organization of the Petroleum Exporting Countries agreed its first production curbs in a decade and the first joint cuts with 11 non-OPEC producer nations, led by Russia, in 15 years. Continued...