The oil price increased to US$52 per barrel after Saudi Arabia and Russia agree to cut back oil supply until 2018
Energy ministers from both Saudi Arabia and Russia met today, to discuss the possibility of extended supply cuts from two of the world's largest oil suppliers. They announced that the supply cuts should be extended until 2018, an additional nine months. This is longer than the original optional six-month extension that was specified in the original OPEC cuts, which came into force in November 2016.
The effects of these talks have has a substantial effect on the oil price. According to Bloomberg, "U.S. West Texas Intermediate added as much as 1.8 per cent to US$48.70 per barrel on the New York Mercantile Exchange, the highest since 2 May. Global benchmark Brent crude added 1.7 per cent to US$51.69 on the ICE Futures Europe exchange." However, these prices are still more than 50 per cent below the oil price peak, which was in 2014.
"There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average," commented Saudi Arabia's Minister of Energy, Khalid al-Falih told the briefing in Beijing alongside his Russian counterpart, Alexander Novak.
"We've come to the conclusion that the agreement needs to be extended."
