The OPEC+ quota deal was extended with another 9 months til the end of 2018. The OPEC members, plus external major oil producers, set limit of oil yields, aiming to rebalance the super-saturated commodity market, but reducing the global reserves.
Saudi Arabia, Iraq and Iran, which are the three largest exporters in OPEC, said earlier that they would like the quota deal to be extended by another nine months after the end of March, which was initial deadline for the deal. The agreement covers another 10 countries outside the cartel, including Russia. Even after the deal is extended, the group will review it at its next planned meeting in June.
“I prefer to be nine months more”, said the Saudi Arabian oil minister, Khalid Al-Falih. “We will meet again in June. Then, we will not only analyze the first half of the year, but also will see our forecasts for the third and fourth quarters of 2018”, added he.
Russia, which is the largest producer outside the group, also agreed to continue the deal by the end of 2018.
An year after OPEC and its allies joined forces to regain control of the oil market from the hands of US shale makers, it is widely agreed that work is not over. However, the details of the final deal today will be important for the traders. The cartel plans to hold a regular ministerial meeting next June, giving it the flexibility to change its policy in the meantime. For some oil investors, however, this potential review is a cause for concern. For others, it is a normal part of the cycle of OPEC meetings organized twice per year.
“If there are changes in the events in 2018, we will take this into account during our meeting in June, or at the smaller ministerial oversight committee that meets every three months”, said Khalid Al-Falih. “We have said from the beginning that we want this adjustment to be careful. We do not want to shake the oil market and the global economy”, added he.
It is too early to talk about an exit strategy as OPEC and its partners rely on oil demand in the third quarter of 2018 to finally eliminate the surplus that has been on the market for three years, according to ther Saudi Arabian oil minister.
Prior to meeting today, a number of banks have warned investors to prepare for disappointment over Russia’s hesitation to extend the deal. There was no indication that Moscow had received the assurances it was looking for, how and when the deal could be completed, but Russian Energy Minister Alexander Novak nevertheless gave a positive impression of the discussions before the meeting.
“We had very constructive conversations”, said Alexander Novak. “The market is not yet rebalanced, it needs additional joint action after April 1st. They all recommend extending the agreement”, added he.