OPEC and its partners, including Russia, agreed to extend oil-production cuts to the end of 2018 and included Libya and Nigeria in the deal for the first time.
Iraq’s Oil Minister Jabbar Al-Luaibi confirmed the decision after a day of talks in Vienna that reflected a rare consensus between members of the Organization of Petroleum Exporting Countries and its allies. All agreed that the market is moving in the right direction, but is not yet balanced.
After some initial hesitation, Russia supported the accord that will result in nations accounting for more than half the world’s oil supply restraining output for two years.
Libya and Nigeria, previously exempt from cutting production due to internal strife, agreed to a collective cap on their output that exceeds the nations’ current production, according to Iranian Oil Minister Bijan Namdar Zanganeh. That means their inclusion won’t immediately deepen the overall level of supply reduction.
“Fundamentally the cuts have worked well,” Total Chief Executive Officer Patrick Pouyanne said at a press briefing in Antwerp, Belgium. “I’m not surprised they decided to extend.”
Russia had previously sought assurances on how and when the agreement would be phased out, people involved in negotiations said earlier this week. The country needs greater clarity than most OPEC members because its economic policy making is more complex, including a floating exchange rate that fluctuates with the oil price.
It would be premature to talk about an exit strategy because OPEC and its allies are relying on oil demand in the third quarter of 2018 to finally eliminate the inventory surplus, Saudi Oil Minister Khalid Al-Falih said Thursday before the meeting. But the kingdom is open to discussions about how the group could wind down the cuts “very gradually” once its goals are achieved, he said.
OPEC ministers didn’t have a detailed discussion about the mechanism that will be used to review the deal in June, Zanganeh told reporters.
He also said Nigeria and Libya had agreed to a collective output cap of 2.8 million barrels a day. Nigeria pumped 1.73 million barrels a day in October and Libya 980,000 a day, according to data compiled by Bloomberg.