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The world’s biggest oil producers have agreed to extend a deal to curb oil production throughout 2018 to shrink swollen stockpiles and keep prices above $60 a barrel.
Saudi Arabia and Russia, whose combined production makes up a fifth of global supplies, have together led an effort by 24 countries inside and outside the Opec cartel to curb global production by 1.8m barrels next year.
The deal was set to expire in March if an extension had not been reached on Thursday.
The agreement means that Saudi Arabia and Russia, whose combined output totals more than 20m barrels a day, have stood by a deal sealed by Russian President Vladimir Putin and King Salman last year, and which has dominated crude markets for the past 18 months.
Khalid al Falih, Saudi Arabia’s energy minister said it was a “solid” deal that renewed their commitment and was a “statement of their relationship” with Russia in the oil industry.
The decision to extend output cuts will be reassessed in the middle of next year when Opec has its next scheduled meeting. “We will react and respond depending on how events may unfold,” said Mr Falih.
Alexander Novak, Russia’s energy minister, said although producers were “satisfied” with the impact of the cuts on the market so far, “we are still far away from reaching our goal”.
“By agreeing a nine-month extension this shows a serious commitment from Saudi Arabia and Russia to keep pushing down inventories while propping up the price,” said Jason Schenker at Prestige Economics.
Brent crude, the international oil benchmark, rose almost 1 per cent to $63.57 a barrel.
Before the meeting in Vienna, Russia, the largest oil producer outside Opec, had been at odds with other members over how long to extend the deal, which came into effect in January.
Although Mr Falih said Russia and Saudi Arabia were “united shoulder to shoulder” he acknowledged disagreement between the sides, saying “we had healthy and frank discussions”.
Russian oil companies had privately pushed for a shorter six-month extension, citing concerns that they would lose ground to the US shale industry, which has been rejuvenated by the 30 per cent recovery in prices over the past 12 months.
The US shale industry has cast a long shadow over Opec since its rapid growth triggered oil’s collapse from above $100 a barrel in 2014. After slowing initially as prices dropped to lows below $30 a barrel early in 2016, the sector has recovered this year as prices have stabilised.
Production forecasts for the industry are still in a wide range, however, leaving a question mark over the market’s direction and whether Opec and its allies will end up sacrificing market share as they try to prop up prices.
Speaking ahead of the meeting, Mr Falih sought to allay those fears, saying that more production from traditional oil producers would be needed to meet robust demand growth, above 1.5m barrels a day for both 2017 and 2018. “We don’t think shale can do it alone,” he said.
Saudi Arabia had lobbied for a nine-month extension from March 2018, saying that the producers’ alliance had only reached the “the halfway mark” in drawing down the glut of oil that had built up during the oil crash between 2014 and 2016.
“If something is working, you don’t let go,” Mr Falih said before the meeting.
Participating countries did not publish any figures for individual production allocations and did not formally include Opec members Libya and Nigeria in the deal. Both countries, which have been exempt from the agreement because of conflict, have pledged to be disciplined with their production in 2018.
Saudi Arabia said it was “premature” to talk of plans for winding down the cuts at this stage. But the opportunity to enact “further adjustment” depending on market conditions in June could placate Russia, which has sought guidance on how producers would exit the deal if the market was to tighten too quickly.