Oil price fell regardless of agreement to extend production cut
According to reports, The oil price has dropped by almost 5%, regardless of oil-producing nations approving to lengthen production cuts for a further nine months.
As in recent meeting in Vienna, energy ministers from both Opec and non-Opec countries settled to uphold output curbs, due to end next month, until March 2018.
Although investors had been expecting the oil producers would go longer.
Brent crude is $2.60 lower at $51.36 a barrel, while West Texas Intermediate is down $2.58 at $48.78 a barrel.
In the meantime Saudi Arabia’s energy minister, Khaled al-Falih, who co-chaired the meeting with his Russian counterpart Alexander Novak, said: “We considered various scenarios from six to nine to 12 months and we even considered options for higher cuts.
“All indications are solid that a nine-month extension is the optimum, and should bring us to within the five-year average of inventories by the end of the year.”
In last December all Opec countries and 11 other oil-producing nations, like Russia, first decided to trim down production in an effort to enhance waning prices.
The production cut was almost 1.8 million barrels per day, which was equal to about 2% of global oil production.
However markets didn’t responded positively to this agreement. The price of crude oil has dropped instead of rising. As the Vienna pact was perhaps the least they expected, after reports of widespread support among the countries concerned for a nine-month extension.
In any case Opec and the other countries involved have a trouble with the American shale oil industry. As slashing oil production creates a chance in the market for shale producers and surging prices make them more profitable. They will be the definite beneficiaries of the Vienna deal, even if it does achieve something in the group’s goal of getting commercial stocks of crude oil down.