OPEC agreed to extend its oil-production cuts to the end of 2018 as the job of rebalancing the market is not yet done, according to delegates at a ministerial meeting in Vienna.
Talks have now moved on to the mechanism that will be used to review the agreement in mid-2018, the delegates said, according to Bloomberg, asking not to be identified as the closed-door discussion isn’t yet over.
Ministers also need to get Russia, their largest non-OPEC ally, on board at a meeting with other partner countries later on Thursday.
The outcome of the day’s initial gathering, comprising just OPEC ministers, reflects a rare consensus between members of the Organization of Petroleum Exporting Countries, with no dissonant voices in the run-up to the meeting. All agreed 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 policymaking 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 at $64.01 a barrel at 12:48 p.m. in London, up 1.4 percent.