OPEC and leading global oil producers agree supply cuts through 2018

An agreement has been struck between members of OPEC and non-OPEC oil producers to extend output cuts until the end of 2018, as the market tries to clear a global glut of crude.

The deal, which has been expected for several months, was struck in Vienna where OPEC members met to finalise the terms of the extension to the supply cuts that have been in place since the start of 2017.

Oil producers honouring the agreement will continue to cut production by 1.8 million barrels per day (bpd), including OPEC’s leader Saudi Arabia and non-OPEC member Russia, the world’s top two oil producers.

Under the new agreement, OPEC has decided to cap the combined output of Nigeria and Libya at below 2.8 million bpd. Previously both African nations were exempt from cuts due to internal economic and political difficulties.

During the OPEC meeting, prices reached high as US$64 a barrel but soon dropped off after the announcement was made by Saudi Energy Minister Khalid al-Falih.

Chris Midgley, head of Analytics at S&P Global Platts commented: “In agreeing to extend current production quotas OPEC and non-OPEC nations are managing a fine balance which is likely to maintain prices at current levels in the near term.

“Normalised stocks are lower than generally thought because of new infrastructure builds, stronger demand and higher exports of crude and products.”