In attempt to end the three-year supply problems, OPEC will extend oil cuts into 2018.
The cartel plan to extend its supply cuts for an additional nine-months, as expected. The agreement, which will be confirmed later today, will include a 1.8 million barrel per day decrease, meaning the plan made in November will lengthen to March of 2018.
Markets anticipated the deal after Saudi Arabian and Russian energy ministers announced that it was ‘’highly likely’’ that OPEC and its allies would extend the programme over the next nine-months.
OPEC are aiming to rebalance the oil market by curbing production to help stimulate demand.
However, investors are disappointed that the cartel have not increased the size of the cuts, fearing that simply extending the current production plan will not be enough to put a dent in the mountainous stockpiles.
OPEC have alluded that there may be room to extend the cuts to June next year, if oil prices do not start to rise.
Many investors fear that OPEC’s control over the market has been severely compromised by the US shale industry. America have become a force to be reckoned with, threatening to overtake Saudi Arabia and Russia to become global supply leaders.
In 2014, OPEC attempted to squeeze America out of the market by flooding the globe with oil supplies and undercutting its US competitors. However, the price of oil decreased much more than expected. The cartel attempted to rectify the low prices last year, even securing non-OPEC member, Russia, as an accomplice to help rejuvenate oil prices.
OPEC’s efforts to end the glut have taken longer than expected. Will this supply-cut finally stimulate prices, or does America hold the key to oil prices now?