Saudis See All On Board to Extend Oil Cuts for 9 Months

All producers agree to extend crude output cuts by nine months to help trim a supply glut, according to Saudi Arabia’s energy minister.

The extension through the first quarter of 2018 will help producers reach their goal of trimming global stockpiles to a five-year average, Khalid al-Falih said. OPEC and other global producers such as Russia had agreed to reduce production in the first six month of this year, and the decision to extend the cuts will be taken when they meet in Vienna at the end of the month, Falih said, Bloomberg reported.

“We think we have everybody on board,” Falih said in an interview with Bloomberg television in Riyadh on Saturday. “Everybody I’ve talked to indicated that nine months was a wise decision.”

National representatives from the Organization of Petroleum Exporting Countries and officials from several non-members discussed in Vienna on Friday the outlook for rising US shale oil production, which has been diluting the price impact of their production cuts.

The producers, who together account for about half the world’s oil supply, have seen the initial price boost from their historic agreement fade as shale companies deployed more rigs and raised the country’s output to the highest since 2015.

OPEC and other producers who agreed to the cuts last year are not targeting any specific oil price, Falih said. “Everybody wants the extension, as we realize we have not achieved the objective of bringing global inventories down to a five-year average."

“OPEC and non-OPEC countries are working together, and that should encourage investment. My objective is clarity of where the market is going so that people invest, and I am less concerned about prices over the next 12 months than I am over the next 3 years,” he said.

While news of a proposal for a nine-month extension of output cuts helped send prices to a two-week high on Monday, crude remains stuck near $50 a barrel, less than half the level traded in 2014.

Falih added that producers are working on fixing some “deviations” to the output limits set when they agreed on the cuts last year.

"I don’t accept that Saudi Arabia or any other countries should pick up the slack from others. We did go the extra mile initially to set an example and be a role model, and I think our colleagues appreciated that and responded positively.”