Sources say talks are now getting underway with Russia and other partners to bring them on board
OPEC agreed to extend its oil-production cuts to the end of 2018, subject to a review at its next scheduled meeting in June, according to delegates gathered in Vienna.
With OPEC’s initial meeting concluded, talks are now getting under way with Russia and other partners to bring them on board. Ministers also proposed including Nigeria and Libya in the agreement for the first time by imposing caps above their current production, delegates said, asking not to be named discussing closed-door negotiations.
The outcome of the day’s talks so far reflects a rare consensus between members of the Organization of Petroleum Exporting Countries, with all agreeing that the market is moving in the right direction, but is not yet balanced. While Moscow has voiced its support for an extension, it is said to want assurances on how and when the agreement will be phased out.
“OPEC ministers have very clearly said that they’re extremely committed towards getting that inventory overhang down,” Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd in London, said in an interview with Bloomberg Television. “The questions that are going to get asked now are about Russia’s involvement, which I also think is going to be very much for the full year.”
For Russia, reassurance about how the curbs will eventually be wound down seems to be as important as the duration of the extension, according to people involved in negotiations earlier this week. It needs greater clarity than most OPEC members because its economic policy making is more complex, including a floating exchange rate that fluctuates with the oil price.
It’s premature to talk about an exit strategy because OPEC and its allies are relying on oil demand in the third quarter of 2018 to finally eliminate the inventory surplus, Saudi Oil Minister Khalid Al-Falih said Thursday before the meeting. But the kingdom is open to discussions about how the group could wind down the cuts “very gradually” once its goals are achieved, he said.
Benchmark Brent crude traded up 0.6 percent at $63.49 a barrel at 3:36pm in London, paring earlier gains of 1.7 percent.
Nigeria, an OPEC member currently exempt from production cuts, is willing to comply with a request to cap its oil output at 1.8 million barrels a day, while Libya has yet to decide, delegates said. Kuwaiti Energy Minister Issam Almarzooq said before the meeting that Libya was asked to limit output to about 1 million barrels a day.
Those quotas would be above the countries’ current production, with Nigeria pumping 1.73 million barrels a day in October and Libya 980,000 a day, according to data compiled by Bloomberg.