The 13-state Organization of the Petroleum Exporting Countries has extended by nine months the cuts in oil production it approved six months ago.
The move is evidence that the first half-year of reduced production was not sufficient to reduce oil stockpiles and boost prices.
Experts say OPEC’s production slowdown met with high compliance among member countries and 11 non-OPEC members. The agreement reduced production by about 1.8 million barrels per day. However, increased American oil production, reduced demand for fuel, and high export levels from OPEC warehouses have not reduced the level of worldwide crude oil stockpiles.
The extension could well help OPEC achieve its aims, analysts say. Fuel demand is higher in the summer. Americans hit the road for vacation travel and much of the world turns up its air conditioners, causing a spike in demand for oil to fuel electric generators.
"The important thing to consider here is that the world uses about 2 million barrels per day more oil in the second half of the year than the first half of the year, so if you're ever going to impact supply-demand, the second half of the year is the time to do that," said Jacques Rousseau, managing director at research firm Clearview Energy Partners.
OPEC’s goal is to reduce worldwide oil stockpiles by about 300 million barrels. That means oil-producing countries must pump less oil out of the ground and that they must slow shipments from their own warehouses to storage facilities around the world.
Market analysts say oil prices could linger at the $50 barrel price until exports are reduced and stockpiles are used up.
Saudi oil minister Khalid al-Falih said Thursday that extending the cuts for nine more months "is a very safe and almost certain option to do the trick."
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