Recent comments from Saudi Arabia’s Oil Minister, Khalid al-Falih, suggest that OPEC is edging towards an agreement to extend its oil production cuts when it meets in Vienna next month. Having ruled out an extension earlier in the year, Mr. al-Falih has softened his tone amid mounting evidence that the cuts have, so far at least, failed to prompt a faster rebalancing of the oil market – global crude stocks, in particular, have not fallen as far as many had hoped. However, Mr. al-Falih’s suggestion that the deal may only be extended for a further three, rather than six, months indicates that the Saudi authorities are wary of entering a prolonged cycle of ever-deeper output cuts, such as those which occurred in the early 1980s. It could also reflect concerns that the cuts have simply made room for shale producers in the US to ramp up output and grab market share.
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