After Saudi and Russia show support, OPEC is likely to extend oil output cuts

VIENNA, Austria - The Organization of Petroleum Exporting Countries (OPEC) is likely to extend oil output cuts for another nine months as ministers and delegates gather for the group’s meeting in Vienna this week.

The agenda of the meeting would be to discuss how to tackle a global glut of crude, and comes in light the world’s top two oil producers, Russia and Saudi Arabia proposing to extend oil cuts.

OPEC's top producer, Saudi Arabia said earlier last week that it was in favor of extending the output curbs by nine months rather than the initially planned six months.

The country seeks to speed up market rebalancing and prevent oil prices from sliding back below $50 per barrel.

Earlier this week, Saudi Energy Minister Khalid al-Falih won support from OPEC's second-biggest and fastest-growing producer, Iraq, for a nine-month extension and said he expected no objections from anyone else.

The OPEC meeting, scheduled to be held on Thursday will now consider whether to prolong the deal reached in December.

As part of the previous deal, OPEC and 11 non-members, including Russia had agreed to cut output by about 1.8 million barrels per day in the first half of 2017.

Following the implementation of the deal, prices were pushed back above $50 per barrel, giving a fiscal boost to major oil producers. 

However, the decision also spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market's rebalancing.

On Tuesday, Saudi Arabia's Gulf ally Kuwait said that not every OPEC member was on board yet for an extension to March 2018.

However, most ministers and delegates in Vienna said they expected a fairly painless meeting.

According to Ecuador Oil Minister Carlos Perez, OPEC and other oil-producing countries would discuss a six- or nine-month extension to output cuts and will probably choose the latter.

Speaking to reporters after arriving in Vienna, Perez, whose country is in OPEC, said, “Six and nine months are both proposals on the table ... we will support the majority, probably the nine months.”

Meanwhile, Noureddine Boutarfa, energy minister of OPEC member Algeria, said OPEC was discussing a possible nine-month extension, with curbs kept at the same level as under the group's existing deal.

Boutarfa told reporters, “Right now we are talking about nine months.” 

Another OPEC delegate told the media, “The Saudi oil minister's view seems accurate and no serious objection is expected if at all.”