OPEC, Non-OPEC Agree on Outline of Oil Cut Extension

OPEC, Non-OPEC Agree on Outline of Oil Cut ExtensionOPEC, Non-OPEC Agree on Outline of Oil Cut Extension

OPEC and non-OPEC producers, led by Russia, have crafted the outline of a deal to extend their oil production cuts to the end of next year, although both sides are still hammering out crucial details, according to people involved in the conversations.

The Organization of Petroleum Exporting Countries and several non-OPEC nations led by Russia will meet next week in Vienna, Austria, to discuss prolonging their output curbs. The Kremlin had been hesitating over the need for an extension, Bloomberg reported.

After days of talks, Moscow and Riyadh now agree on the need to announce an additional period of cuts at the Nov. 30 meeting, the people said, asking not to be named because the conversations are private.

Moscow wants the extension deal to include new language that would link the size of the curbs to the health of the oil market, they said.

Russia is ready to discuss prolonging the cuts at next week’s meeting, Energy Minister Alexander Novak told reporters in Santa Cruz, Bolivia, earlier Friday. He declined to say whether Russia favors an extension now.

West Texas Intermediate crude, the US benchmark, extended gains to the highest level since July 2015. Futures for January delivery rose as much as 1.5% to $58.90 a barrel in New York.

The negotiations are still ongoing, with oil ministers due to arrive in Vienna early next week. The deal is not finalized as Russia and Saudi Arabia have not yet agreed on the new language, the people said.

OPEC and non-OPEC countries are discussing several formulas to accommodate the Russian demands, including linking the cuts to the supply-demand balance on the global oil market, or the level of oil inventories in industrialized countries, the people said.

Another option is making a clear reference to the fact that the deal could be reviewed again early next year, including the possibility of calling for another meeting.

Some analysts have pointed out that a failure to agree on the market remediation would cause oil prices to plummet immediately, forfeiting any gains that have been made in the last year.

“We’re in extensive consultations with all our colleagues around the world within and outside OPEC and we can’t make any statements at this stage until we get to Vienna [at the end of the month],” Saudi Oil Minister Khalid al-Falih told reporters last week. “Everybody wants to call it the right way, but stay tuned and you’ll find out when I find out in Vienna."

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