Russia, Saudi Arabia agree to extend oil output cuts for another 9 months
The Dollar Business Bureau
Russia and Saudi Arabia agreed on Monday to extend oil output cuts for another nine months till March 2018, to address the global crude glut and the increase in oil prices.
The timing of the announcement sends a clear signal to other OPEC member countries before their next meeting on May 25, to follow suit. The ministers of both the countries, Khalid al-Falih and Alexander Novak in a joint statement said, they pledged ‘to do whatever it takes to reduce the global inventories to their five-year average’, has surprised the stock markets, raising crude prices up more than 1.5% in the Asian trade markets.
Addressing the media in Beijing, Falih and Novak said, "There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average.” They were optimistic that other OPEC producers who were not in current deal would join them.
Saudi Arabia and Russia control a fifth of the global oil supplies and have decided to take matters into their hands as crude’s prices fell abysmally low to $50/barrel.
Earlier on Jan 1 as a New Year gift to the world, the OPEC countries and other crude producing countries agreed to cut output by almost 1.8 million barrels per day during the first six months of the year. Russia’s Rosneft, the largest Russian crude producer, is said to have readily agreed to the extension.
While the oil majors battled it out, the US which had not participated in the original agreement, increased its drilling activity more than 10% since its mid-2016 oil-depression. It has also increased its exports to Asia, which is now considered to be the world’s fastest and largest growing market, worrying the OPEC producer-countries that have dominated the Asian markets for a long time.
Sources familiar to OPEC said that oil inventories have declined by one-third since the beginning of 2017!