VIENNA: Nations that supply a majority of the world’s oil agreed Thursday to keep a lid on output for all of 2018, despite Russia starting to get cold feet and tensions between Iran and Saudi Arabia in the Middle East.
The 24 nations, which account for some 60 percent of global supply, will maintain production curbs of 1.8 million barrels per day, the energy minister of OPEC kingpin Saudi Arabia said.
“I am pleased to announce that the decision has been unanimous. It’s a solid decision… which is to roll over and extend the deal through the end of December 2018,” Khaled al-Faleh told a news conference in Vienna.
In an apparent nod to Russian misgivings, however, a joint statement said that producers will in June review “progress achieved towards re-balancing of the oil market” and make “adjustments” if necessary.
The agreement among the 14 members of the Organization of the Petroleum Exporting Countries and 10 others including Russia was first struck a year ago and was already extended once.
The aim is to reduce a global excess in supply that has pushed oil prices lower and left a huge hole in the finances of producer nations, despite making life easier for buyers of crude.
So far, helped by improving economy boosting demand, it has worked, helping oil prices climb from less than $30 in early 2016 to around $60 now and reducing bloated inventories to more normal levels.
On Thursday oil prices were little changed. Brent Crude lost five cents to $62.48 and fellow benchmark West Texas Intermediate was up five cents at $57.35, both recovering from a dip earlier.
Higher prices have been of little help to founding OPEC member Venezuela, however, teetering on the brink of a full-blown debt default.
Manuel Quevedo, the general newly installed as Venezuela’s oil minister, on Thursday put the country’s dire production problems down to “sabotage”.
“This sabotage plan is aimed at achieving a repeat of 2002-03 when there was an attempted coup against (former president Hugo) Chavez,” Quevedo, in civilian clothes, said in Vienna.
His predecessor Eulogio del Pino was one of several people arrested at dawn in Venezuela on Thursday. Prosecutors said it was an operation “to dismantle the cartel that has been hitting the oil industry.”
Relations between OPEC members Iran and Saudi Arabia have deteriorated sharply in recent months, with the two countries engaged in a devastating proxy war in Yemen and backing different sides in Syria.
Saudi Arabia’s Crown Prince Mohammed bin Salman, who is moving to modernise and wean the kingdom off oil revenue, last week called Iran’s supreme leader “the new Hitler of the Middle East”.
But when it comes to selling oil, their interests meet, and both sides managed to keep their differences outside the room in Vienna to back the extension of the output accord.
Non-OPEC Russia, represented by stern-faced Energy Minister Alexander Novak, also supported the extension, despite misgivings in particular from Russian oil firms.
They fear that higher oil prices will help US shale oil producers ramp up output and grab market share.
In addition, Moscow is pressing for clarity on how and when to end the curbs, experts said.
Fawad Razaqzada, an analyst at Forex.com, said that the June review meeting means there is a possibility the agreement could end sooner than expected.
“With oil prices being already significantly higher compared to their 2016 lows, there will be less incentive for OPEC and Russia to maintain their oil supply collusion, especially as US shale producers continue to win market share,” Razaqzada said.
Faleh, the Saudi minister, conceded that his and Russia’s economies and oil industries are “different”, but insisted that he and Novak they saw eye to eye.
“I want to assure you that you can’t find light between us. We are united shoulder to shoulder,” Faleh said alongside Novak at the news conference.