There are indications that the Organisation of Petroleum Exporting Countries is likely to extend cuts in oil output when its ministers meet later in May and will need to keep limiting production until late 2018.
Chairman of Facts Global Energy, Dr. Fereidun Ferashaki, stated in Dubai that the reaction of global crude inventories to the cuts will determine how long OPEC and allied producers stick with their policy of pumping less oil to counter a global glut.
He said in an interview with Bloomberg, “The probability that OPEC will agree to extend its cuts is at 100 percent and the cuts will have to be extended even beyond this year, to the middle or even to the end of next year.”
Earlier in December 2016, OPEC and 11 other producers including Russia agreed in to pare production by 1.8 million barrels a day during the first half of this year, thereby seeking to eliminate an oversupply that depressed prices to less than half of their 2014 high, when benchmark Brent crude sold at $115 a barrel. Brent jumped 52 percent last year for the first annual gain after three consecutive decreases and was trading at $51.65 a barrel, down 40 cents, at 5:18 p.m. in Dubai.
“The oil market needs more time to start using up stored inventories, which are on the verge of declining, Harold Hamm, chief executive officer of Oklahoma-based Continental Resources Inc., said at the same conference. U.S. oil output is poised to expand this year by at least 400,000 barrels a day, most of it from the Permian Basin, to a level of about 9.4 million barrels a day,” he said.