OPEC, collaborators extend output restraint

Restraint of oil production by members of the Organization of Petroleum Exporting Countries and 10 cooperating nonmembers is to continue through 2018 under agreements reached Nov. 30 in Vienna.

The extension was the second for joint agreements that took effect Jan. 1 to lower production by a total of nearly 1.8 million b/d, 1.2 million b/d of it by participating OPEC members. The supply management aims to lift the price of crude oil.

The original agreements were to have expired at the end of June but were extended in May to July 1, 2018. The new agreements keep the effort in place through yearend 2018.

Compliance with the agreements has been solid by historic standards.

In its November Oil Market Report, the International Energy Agency estimated October compliance by the 12 OPEC members with output ceilings at 96%. Compliance by the 10 collaborating countries was 81%. Compliance by Russia, which agreed to cut output by 300,000 b/d, was 98%.

In a speech at the start of the latest meeting, Khalid A. Al-Falih, Saudi Arabia's minister of energy, industry, and mineral resources and president of the OPEC Conference, said, “The extension decision was right.”

He cited declines since May in industrial-nation oil stocks and in crude oil in floating storage. And he noted that the forward market structure has flipped into backwardation, with the price of crude for prompt delivery higher than prices for crude to be delivered later.

“All in all, market stability has improved, and the sentiment is generally upbeat,” he said. “The rebalancing trend has accelerated, and inventories are on a generally declining trend.”