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Extension Oil-Output Cut By Six Months Being Looked Into By OPEC And Non-OPEC Countries

Extension Oil-Output Cut By Six Months Being Looked Into By OPEC And Non-OPEC Countries
A decision to review whether a global pact to limit supplies should be extended by six months was announced by a joint committee of ministers from OPEC and non-OPEC oil producers, the cartel said in a statement.
The committee "reports high level of conformity and recommends six-month extension", an earlier draft of the statement had said.
However, the committee had requested a technical group and for the OPEC Secretariat to "review the oil market conditions and revert ... in April, 2017 regarding the extension of the voluntary production adjustments", was what was said in the final version.
The lack of an immediate extension could drag on crude prices, said oil sector analysts.
"The dropping of the recommendation to extend cuts in favour of technical review committee is likely to lead to a lot of disappointment and potential further liquidation of long positions by money managers that will put downward pressure on oil prices," said Harry Tchilinguirian, head of commodities strategy at BNP Paribas in London.
Although a senior industry source said the committee lacked the legal mandate to recommend an extension, it was not immediately clear why the wording had been changed.
In order to review progress with their global pact to cut supplies review progress with their global pact to cut supplies, the Organization of the Petroleum Exporting Countries and rival oil-producing nations were meeting in Kuwait.
In the first half of the year, a decision to cut their combined output by almost 1.8 million barrels per day (bpd) was made by OPEC and 11 other leading producers including Russia in December. With the possibility of a six-month extension, the original deal was to last six months.
"Any country has the freedom to say whether they do or they don't support (an extension). Unless we have conformity with everybody, we cannot go ahead with the extension of the deal," Kuwaiti Oil Minister Essam al-Marzouq said, adding that he hoped a decision would come by the end of April.
The statement said that the oil ministerial committee "expressed its satisfaction with the progress made towards full conformity with the voluntary production adjustments and encouraged all participating countries to press on towards 100 percent conformity."
Crude has been lifted to more than $50 a barrel by the December accord, aimed at supporting the oil market. But U.S. shale oil producers, which are not part of the pact, have been boosted to increase output by the price gain.
An increase in crude oil stocks has been due to factors like low seasonal demand, refinery maintenance and rising non-OPEC supply and the committee said it took note of these factors. The liquidation of positions by financial players was also observed by it.
"However, the end of the refinery maintenance season and noticeable slowdown in U.S. stock build as well as the reduction in floating storage will support the positive efforts undertaken to achieve stability in the market," it said.
The OPEC Secretariat was asked to come back with recommendations in April regarding an extension of the agreement after conducting a review of the oil market.
"This reaffirms the commitment of OPEC and participating non-OPEC countries to continue to cooperate," the statement said.

Christopher J. Mitchell

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