The Organisation of Petroleum Exporting Countries (OPEC) Thursday took a decision to cap the output of Nigeria and Libya at 2017 production levels without deciding on the figures.
The oil cartel also agreed to extend oil output cuts until the end of 2018 as part of the global efforts to eliminate excess oil supply in the international market.
Nigeria, Africa’s biggest oil producer, and Libya had previously been exempted from the cuts due to unrest in both countries and lower-than-normal production.
However, the decision to extend the production cuts saw crude oil prices rising, with the global benchmark Brent trading near a two and a half year high above $64 per barrel.
Speaking to reporters after Thursday’s OPEC meeting in Vienna, Austria, Iranian oil minister Bijan Zanganeh said the organisation had agreed to extend the cuts by nine months until the end of 2018, as largely anticipated by the market.
The current deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost oil prices, expires in March 2018.
Zanganeh added that OPEC also decided to cap the output of Nigeria and Libya at 2017 levels.
The OPEC meeting was followed by talks with non-OPEC producers led by Russia.
Before the meeting, 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 OPEC would examine progress at its next regular 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 before Thursday’s meetings that a review of the deal was possible in June in case the market became too tight.
But Zanganeh said later no such debate had taken place at the OPEC meeting.
Reacting to OPEC’s decision, the international benchmark Brent crude rose by more than 1 per cent Thursday to trade near $64 per barrel while the U.S. West Texas Intermediate crude rose to $57.63, after falling more than two per cent since last week.
With oil prices rising above $60, Russia had expressed concern that an extension for the whole of 2018 could prompt a spike in crude production in the U.S., 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 giant Aramco next year and would hence benefit from pricier crude.
Russia had 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.
“We need to work out a strategy for 2018,” Russian energy minister Alexander Novak had said.
Reuters reported that 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.