by WorldTribune Staff, May 18, 2017
Saudi Arabia and Russia on May 15 said they agreed to extend a deal to cut oil production through March 2018.
Following a meeting in Beijing, Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said: “The two ministers agreed to do whatever it takes to achieve the desired goal of stabilizing the market and reducing commercial oil inventories to their five-year average level.”
Falih added: “We’ve come to the conclusion that the agreement needs to be extended.”
Saudi and Russia produce a combined 20 million barrels of crude oil a day – about one-fifth of global consumption – and other oil-producing nations are expected to follow their lead over cuts, the BBC reported.
Russian President Vladimir Putin said extending output cuts for a further nine months was the right thing to do: “We support the proposal.”
Oil prices rose more than 3 percent after the announcement with a barrel of Brent Crude jumping to $52.52.
Industry analysts say OPEC, which is dominated by Saudi Arabia, and non-OPEC producers led by Russia have been attempting to use the production cuts to drive up prices but their efforts could be undermined as the U.S. is not included.
Virendra Chauhan, an analyst at Energy Aspects, said: “OPEC and Russia recognize that in order to get the market back on their side they will need ‘shock and awe’ tactics where they need to go above and beyond a simple extension of the deal. The market will also be looking at export cuts and not just production cuts, which is what is required to re-balance the market.”
In recent years Saudi Arabia, concerned with the increase in U.S. shale gas production, increased its oil output to drive down prices in a bid to make shale gas exploration economically unattractive.
Last year, Saudi officials agreed to the kingdom’s first cut in production in eight years.