The world’s largest oil producers have agreed to hold back oil production for another nine months in a bid to lift sluggish prices.
An historic deal hammered out by the world’s largest oil producers last November has been extended, with members of the Organisation of Petroleum Exporting Countries (OPEC) vowing to cuts 1.8m barrels of oil a day until March 2018.
The deal was agreed on Thursday at OPEC’s headquarters in Vienna, between members of the cartel and non-OPEC producers including Russia.
Saudi Arabia’s oil minister Khalid al Falih said the goal of rebalancing the market’s supply with demand was already in hand. “In the absence of that agreement the market would have been aimless,” he said in reference to the original November deal.
He predicted that the market would make “a full recovery”, but that more time was needed.
The deal was widely expected by the market after multiple assurances from OPEC ministers that the group would lock in a deal to reduce the glut of oil, which has weighed down prices for almost three years.
But many in the market had hoped that Opec would take a more aggressive stance against the chronic oversupply of oil by deepening cuts to production.
Oil prices stabilised at $53.70 a barrel after a volatile day of trading.
The deal also sparked derision from critics of the cartel who believe its historic role in balancing the market has been steadily undermined by the rise in US shale and increasing demand from China.
The risk is that higher oil prices will fuel a resurgence in US shale production that could wipe out the effect of the cuts.