Investing.com – Crude futures settled below $50, tumbling nearly 5%, after the Organization of Petroleum Exporting Countries (OPEC) and its allies’ decision to extend production cuts for nine more months, failed to meet traders’ expectations that the cartel group would announce deeper cuts.
On the New York Mercantile Exchange crude futures for June delivery lost 4.7% to settle at $48.90 a barrel, while on London's Intercontinental Exchange, Brent lost $4.1% cents to trade at $51.35 a barrel.
OPEC and non-OPEC members agreed to extend production cuts for a period of nine months until March on Thursday, after the output cuts agreed in November last year failed to rein in the glut in supply, which has pressured oil prices for nearly three years.
The nine-month extension was widely anticipated but traders were hopeful that OPEC would take a more aggressive approach to curb oversupply with deeper cuts, in the wake of a rise in non-OPEC output.
OPEC, however, announced that no new non-OPEC members will join the global deal to reduce supply and confirmed it would adhere to the production cuts of 1.8 million barrels a day agreed in late November.
Saudi Arabia’s energy minister Khalid Al-Falih said current levels were sufficient to “reach the five-year average by the end of the year” and expected to reach target before year-end.
Khalid Al-Falih said he expected a “healthy return” for U.S. shale and remained defiant that a boom in U.S. shale won’t derail OPEC’s effort to tackle the demand and supply imbalance.
Nigeria and Libya will remain exempt from making cuts while Iran would be allowed to retain the right to increase production to the same reference level, around 3.797 million barrels a day, agreed in November last year.