Oil falls as OPEC
prepares to extend output cuts
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[May 25, 2017]
By Christopher Johnson
(Reuters) - Oil prices fell on Thursday as OPEC ministers met to decide
how long to extend oil production cuts in an attempt to drain a global
glut that has depressed markets for almost three years.
One OPEC delegate at the meeting in Vienna said the group of 14 oil
producers had agreed to extend cuts in production by nine months to
Brent crude oil dropped as much as $1.24 a barrel to a low of $52.72
before regaining some ground to trade 80 cents lower at $53.16 by 1100
GMT (7 a.m. ET). U.S. light crude was 90 cents lower at $50.46.
Both benchmarks were still up about 15 percent from May lows.
The Organization of the Petroleum Exporting Countries and other
producers, including Russia, had been widely expected to agree to extend
a cut in oil supplies of 1.8 million barrels per day (bpd) until the end
of the first quarter of 2018.
OPEC's current deal, agreed at the end of last year, only covers the
first half of 2017.
Saudi Arabia's energy minister, Khalid al-Falih, said OPEC was highly
likely to roll over its existing agreement on the same terms for nine
But that disappointed some investors who had hoped that OPEC might
reduce output even further to drain stocks more quickly.
"It is a disappointment that OPEC hasn't done more to balance the
markets," said Olivier Jakob, energy markets analyst at Swiss
"A nine-month extension of the output cuts is already baked into prices.
This shows there's not much more OPEC can do."
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An oil pump jack pumps oil in a field near Calgary, Alberta, Canada
July 21, 2014. REUTERS/Todd Korol/File Photo
Sen, analyst at consultancy Energy Aspects agreed.
"Nine months was priced," she said. "We thought the market would sell off if it
was just (an extension of) nine months."
Energy consultancy Wood Mackenzie said keeping existing oil output at current
levels for another nine months would result in a 950,000 bpd production increase
in the United States, thus undermining OPEC's efforts to balance supply and
U.S. oil production has already risen by more than 10 percent since mid-2016 to
more than 9.3 million bpd as drillers take advantage of higher prices and the
supply gap left by OPEC and its allies.
OPEC ministers were still meeting behind closed doors by 1100 GMT on Thursday.
(Additional reporting by Henning Gloystein in Singapore; editing by Jason Neely
and Edmund Blair)
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