- OPEC agrees to extend output cuts until the end of 2018
- Soaring U.S. output undermines OPEC efforts to tighten market
- U.S. production fast approaching 10 million barrels per day
Oil fell on Thursday, giving up earlier gains after OPEC members agreed to extend curbs on output to the end of next year at a meeting in Vienna, though a final deal hinges on the decision of non-OPEC producers, expected towards the end of the day.
The deal, due to expire in March 2018, saw the Organization of the Petroleum Exporting Countries and other producers such as Russia cut 1.8 million barrels per day from the market in an attempt to tackle global oversupply and bolster prices.
OPEC agreed to extend cuts on Thursday for a further nine months, two delegates at the meeting in the Austrian capital told Reuters, a move largely anticipated by the market.
The most-active February Brent contract was trading 10 cents down at $62.43 a barrel at 1533 GMT. The front-month January contract expires later on Thursday.
U.S. light crude for February delivery was at $57.07 a barrel, down 23 cents.
“The price is surprisingly stable. I can’t remember an OPEC meeting where prices traded in such a narrow range after a decision like today’s. I’m very surprised about that,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.
“We have to wait for the OPEC press conference, maybe prices will move when we get some more details,” he said, adding that he expected prices to drop as they did after the last OPEC output cuts decision.
Though the deal looks set to go through, a final decision involving non-OPEC producers, including Russia, has yet to be announced.
“Last year the cooperation between Russia and Saudi Arabia – OPEC and non-OPEC – was rather unprecedented,” PVM Oil Associates analyst Tamas Varga said.
“If this is extended for another nine months, until the end of 2018, it can only be positive,” he added.
A press conference towards the end of the day is expected to outline whether the overall deal will be put up for review in June 2018.
Russia has been pushing for a clear message on how to exit the cuts, concerned that prices don’t rally too fast and rival U.S. shale firms don’t boost output further.
One of OPEC’s biggest problems while cutting supplies has been rising U.S. output, which is gaining global market share and undermining the group’s efforts to tighten the market.
U.S. oil production hit a new record of 9.68 million barrels per day (bpd) last week, according to government data released on Wednesday.
That is up from 8.5 million bpd at the end of last year, before the cuts were implemented.
Rystad Energy, a consultancy, said it expects U.S. oil production to reach 9.9 million bpd in December, which would bring it close to top producers Russia and Saudi Arabia.