Crude oil prices, which has been dropping lately after the OPEC deal last November to cut overall daily production did not prove to be as effective as the organization thought it would be in helping stabilize oil prices and prevent global oversupply.
9-Month Oil Cut Extension
Prior to the meeting, Saudi Arabia's energy and industry minister Khalid Al-Falih stated that a nine-month extension along with the current amount of production would be the safest way to achieve their goal of preventing a global oversupply and in stabilizing oil prices back to normal levels.
The representative also added that while other options such as bigger cuts to be implemented and a six-month extension have been considered by the group, a suggestion to extend oil production caps by nine months would be the safest way to do it.
Although oil prices slightly lost around $1 per barrel on Faith's comments, oil analysts stated that the small decline might be attributed to the market’s mixed expectations regarding the outcome of the OPEC talk. While some simply expected an extension of the deal, some traders also wanted deeper cuts which is why Faith's comments might have disappointed some investors.
Nigerian oil minister Ibe Kachikwu also commented that most of the OPEC producers are collectively in agreement to extend cuts for another nine months along with an option to extend by three more months. The Nigerian representative believes that oil prices being priced at $50 or higher can be achieved if the producers sticks to the agreed amount to be cut throughout the whole extension period.
Bijan Zanganeh, oil minister for Iran also agreed to the nine-month extension and suggested a target oil price of $55 to $60 per barrel for both OPEC and global shale producers.
Oil Prices
Oil prices have tanked the past couple of weeks as weekly reports from the U.S. Energy Information Administration showed that crude production in the country have continuously risen during the first quarter of the year until the last couple of months. This led the markets to question the United States’ role in global oil production. The rising US crude futures also weighed in on the oil price recovery brought by the OPEC deal and erased most gains during the first half of the first quarter.
Brent crude oil prices declined by around $1.24 per barrel to around $52.72 after rallying to $53.50 following the results of the Vienna meeting. The U.S. West Texas Intermediate crude futures also traded from $50.08 to $50.60 per barrel. Most oil prices became volatile in the middle of the Vienna meeting with the New York benchmark inching 1.3% lower to $50.72 per barrel.