Oil markets remained weak on Friday after tumbling in the previous session when OPEC and allied producers extended output cuts. The move also disappointed investors who were betting on longer or larger supply curbs.
At Thursday’s meeting in Vienna, the Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed to extend a pledge to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018. The initial agreement would have expired in June this year.
Crude oil plunged 5 percent following the announcement, and held its losses early on Friday. Brent crude futures were trading at $51.47 per barrel , up just 1 cent from their last close.
U.S. West Texas Intermediate (WTI) crude futures were back below $50, at $48.53, down 2 cents from their previous close.
Ann-Louise Hittle, Vice President at energy consultancy Wood Mackenzie said that the “decision in Vienna sends a signal of continued support for oil prices from OPEC which helps U.S. onshore drillers make plans” to further increase their production.
Iran’s current crude oil output level will not be reduced under the extension of the OPEC production cuts, Iranian Oil Minister Bijan Zanganeh was quoted as saying on Thursday.
“Iran’s oil output would stand at 3.8 mb/d,” Zanganeh said in Vienna – as quoted by Trend news agency – where OPEC meets to discuss the details of the output cut extension.
OPEC agreed to extend the current cuts for nine months until March 2018 in what was a widely expected decision that sent oil prices plunging as investors hoped for more.
In the initial OPEC deal, Iran was allowed to slightly raise output and keep it capped at 3.797 million bpd. Four months into the deal in which all OPEC members – except for Libya and Nigeria – had to cut output, the Islamic Republic has been sticking to that production ceiling, as shown by OPEC’s secondary data sources.
But Iran, which had argued an exemption for itself in the initial deal with the need to return to pre-sanction levels of production, now wants to increase its output to 5 million bpd by 2021.
Speaking to Iran’s oil ministry’s news service Shana the day before the OPEC meeting, Zanganeh said, when asked if Iran would cut its crude oil production:
‘With oil prices plummeting 4 percent on Thursday, with WTI breaking below $50, it looks like a nine-month extension at current production levels is not enough to convince the market.’