OPEC agreed on Thursday to extend oil output cuts until the end of 2018 as it tries to finish clearing a global glut of crude while signalling it could exit the deal earlier if the market overheats.
Non-OPEC Russia, which this year reduced production significantly with OPEC for the first time, has been pushing for a clear message on how to exit the cuts so the market doesn’t flip into a deficit too soon, prices don’t rally too fast and rival U.S. shale firms don’t boost output further.
The producers’ current deal, under which they are cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost oil prices, expires in March.
Two OPEC delegates told Reuters the group had agreed to extend the cuts by nine months until the end of 2018, as largely anticipated by the market.
OPEC also decided to cap the output of Nigeria at around 1.8 million bpd but had yet to agree a cap for Libya. Both countries have been previously exempt from cuts due to unrest and lower-than-normal production.
The Organization of the Petroleum Exporting Countries has yet to meet with non-OPEC producers led by Russia, with the meeting scheduled to begin after 1500 GMT.
Before the earlier, OPEC-only meeting started at the group’s headquarters in Vienna on Thursday, Saudi Energy Minister, Khalid al-Falih said it was premature to talk about exiting the cuts at least for a couple of quarters and added that the group would examine progress at its next meeting in June.
“When we get to an exit, we are going to do it very gradually … to make sure we don’t shock the market,” he said.
The Iraqi, Iranian and Angolan oil ministers also said a review of the deal was possible in June in case the market became too tight.
International benchmark Brent crude rose more than 1 percent on Thursday to trade near $64 per barrel.
With oil prices rising above $60, Russia has expressed concerns that such an extension could prompt a spike in crude production in the United States, which is not participating in the deal.
Russia needs much lower oil prices to balance its budget than OPEC’s leader Saudi Arabia, which is preparing a stock market listing for national energy champion Aramco next year and would hence benefit from pricier crude.
“Prices will be well supported in December with a large global stock draw. The market could surprise to the upside with even $70 per barrel for Brent not out of the question if there is an unexpected interruption in supply,” said Gary Ross, a veteran OPEC watcher and founder of Pira consultancy.
The production cuts have been in place since the start of 2017 and helped halve an excess of global oil stocks although those remain at 140 million barrels above the five-year average, according to OPEC.
Russia has signalled it wants to understand better how producers will exit from the cuts as it needs to provide guidance to its private and state energy companies.
“It is important … to work out a strategy which we will follow from April 2018,” Russian Energy Minister Alexander Novak said on Wednesday.
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