(Reuters) - OPEC ministers on Monday agreed to extend the oil producers’ group supply cuts until early 2020 to prop up crude prices and offset the risk of a market glut amid growing U.S. output and a weakening global economy.
MARKET REACTION: Benchmark International crude futures turned higher on Monday’s news of a unanimous agreement led by Saudi Arabia and Russia to extend production cuts, with Brent international benchmark LCOc1 last up 0.62% and West Texas Intermediate CLc1 up 1.21%.
BILL FARREN-PRICE, DIRECTOR, RS ENERGY GROUP, LONDON
“The nine-month extension is sensible but it’s only half the job. OPEC+ is going to have to agree on even deeper cuts before this extension runs out.”
“OPEC will have to stay extremely nimble. We have tanker and pipe sabotage, IMO2020, an impending U.S. presidential election, multiple ongoing trade disputes, a nuclear standoff with Iran, historically unprecedented global accommodative monetary policy, and the world’s most rapid expansion ever in supply out of U.S. shale. No one, and I mean no one, is prescient enough to predict what the confluence of these enormous market factors will mean for the oil markets a month from now, much less than next year.”
“The nine months is a positive. It is critical to see that cohesion of the OPEC+ group because we are still dealing with an oversupplied market.
“It is positive for the economy; it’s more affirmation that we have plenty of oil supply even with two-plus years of OPEC restraint in its production. It means U.S. producers can continue to grow with commodity prices supporting their drilling activity, and allows them to continue to take market share from OPEC.”
“We believe oil prices should stabilize in the $55-65 (per barrel) WTI range, allowing U.S. shale to continue to grow but at a lower rate than last two years.”
“The cuts are necessary, but it is somewhat remarkable that we could see OPEC market share sink below 30%. The production scheme has worked to lower global inventories, and the extension keeps them lower through the peak winter demand season. By then, the declining inventories could reach such a level that a real difference is made in the market and in prices.”
ANTHONY HEADRICK, MARKET ANALYST, CHS HEDGING LLC, ST. PAUL, MINNESOTA
“An agreement that extends nine months is price supportive because it gives credit to OPEC’s resolve, but can also be interpreted as a sign that international oil demand remains a top concern. By extension, WTI and Brent prices will continue to remain sensitive to any poor international economic data points.”
Reporting by Liz Hampton, Laila Kearney, Arpan Varghese, Gary McWilliams; Editing by Richard Chang