Oil prices rise after OPEC extends output curbs


—Photo by Reuters

LONDON: Oil prices edged higher on Friday, a day after OPEC and other major producers agreed to extend output curbs until the end of 2018 in a bid to tackle global oversupply and bolster prices.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers led by Russia agreed on Thursday to keep current limits on output in place until the end of next year, although they signaled a possible early exit from the deal should the market overheat and prices rise too far.

Brent was trading at $63.07 by 0931 GMT, up 44 cents on the day. U.S. light crude was 34 cents up at $57.74.

OPEC’s decision to extend output curbs had largely been priced in by the market, analysts said.

Traders had pushed up prices over the course of November in anticipation of the decision, raising Brent by about 3.6 percent and U.S. light crude by about 5.6 percent.

OPEC is showing “a strong commitment to normalizing inventories and also to remain data dependent, which reduces the risk of both unexpected supply surprises and excess stock draws,” Goldman Sachs said in a note.

The deal, which has been in place since January and was due to expire in March, has seen producers reduce output by 1.8 million barrels per day, helping to halve global oil oversupply over the past year.

It has allowed prices to return above $60 per barrel, recovering from lows of $27 per barrel hit in January 2016.

However, Russia expressed concerns the agreement could push prices up too far and called for clarity on an exit strategy.

Saudi oil minister Khalid al-Falih said it was premature to talk about exiting the cuts for at least a couple of quarters, as the world was entering a season of low winter demand, he said OPEC would examine progress at its next regular meeting in June.

The CEO of Russia’s top private producer Lukoil told Reuters that should the oil market overheat, both OPEC and its allies will release new production to rebalance it.

Moscow was particularly concerned that output curbs and any subsequent price rises could simply fuel more drilling in the United States, which is not a party to the agreement.

U.S. production has been a thorn in OPEC’s side, with rapidly increasing shale oil drilling undermining the impact of the group’s output curbs.

U.S. oil production hit a new record of 9.68 million bpd last week, according to government data released this week.—Reuters