VIENNA -- OPEC on Monday extended its deal to cut production for another nine months in an attempt to keep oil prices from sagging as the oil cartel faces a weakening outlook for global demand.
The decision among the members of the Organization of the Petroleum Exporting Countries came during a meeting at the cartel's headquarters in Vienna.
"The commitment to a nine-month extension is unequivocal, very solid, very strong" among OPEC members, said Saudi Arabia's Energy Minister Khalid Al-Falih. He said he expected nonmember producing countries Russia, Kazakhstan and Mexico to join in extending the cuts at a separate meeting today.
Russian President Vladimir Putin has already said he backs an extension.
The production curbs were announced after more than 10 hours of meetings. The talks were marred by hours of wrangling between Iran and other members over a charter to accept the nonmember producers.
Since OPEC joined forces in 2016 with the other producer nations, they have sought to establish an enduring basis for cooperation. But Iran has voiced unhappiness with the dominance that nonmember Russia and regional rival Saudi Arabia exert over OPEC policy.
The decision to extend production curbs through March comes as the International Energy Agency and other market watchers peg back forecasts for demand amid sluggish growth in China and India. At the same time, American shale production has set records, putting the U.S. on the brink of becoming a net oil exporter.
"The oil market is getting excited about the cut extension, but OPEC appears more and more worried about demand," said Andrew Dodson, founder of commodity hedge fund Philipp Oil.
The deal to throttle production by 1.2 million barrels per day started Jan. 1 and was only for the first half of this year. Most of the cuts came from OPEC nations, who agreed to reduce 800,000 barrels per day, with the rest of the cuts coming from Russia and other non-OPEC countries, though not from the United States. Production out of Venezuela, once one of the world's largest producers, has collapsed amid political turmoil there.
The OPEC cuts were aimed to put upward pressure on the price of oil and reduce oversupply.
Though tensions between the U.S. and Iran and attacks on tankers near the Strait of Hormuz have pushed up oil prices in recent days, there are concerns among members that over the longer term demand could weaken because of slower global growth. The International Energy Agency, a group of oil-consuming countries, cut its demand estimate earlier this month.
Experts say a military conflict between the U.S. and Iran would further constrain oil supply and send oil prices higher.
Yet the outlook for demand and prices has been weakening, not least because of the slowdown in the global economy partly as a result of trade tensions between the U.S. and China. That raises the prospect of lower oil demand and consequently lower prices.
The prospect of increased U.S. production of oil from shale deposits also hangs over the market. That could add to supply and weigh on prices, too.
U.S. crude output reached new highs in April, highlighting OPEC's dilemma.
A government report on Friday showed U.S. production grew 2.1% in April to 12.16 million barrels a day. Booming shale production from places such as the Permian basin of West Texas have enabled U.S. oil output to overtake Saudi Arabia and Russia.
"It really means that OPEC has to make a decision to balance the market or shale will do it for them," said Jim Lucier, managing director of Washington, D.C.-based Capital Alpha Partners LLC.
Crude output from the Permian is expected to jump 50% by 2025, according to BloombergNEF.
Gasoline prices are up across the country as Americans prepare to hit the road for the Independence Day holiday.
The national average price for regular unleaded on Monday was $2.71 -- up 5 cents from the week before.
The average retail gasoline price in Arkansas on Monday was $2.36, according to AAA, up from $2.32 a week ago.
The gasoline price increase may not deter many travelers. AAA predicts a record 48.9 million Americans will travel during this week's holiday. And GasBuddy expects a big summer travel season.
"Gas prices remain well under $3," said Patrick DeHaan, GasBuddy's head of petroleum analysis. "That's sort of the key metric that people gauge. Do gas prices start with a 2, 3 or 4?"
OPEC's plan to cut production for the rest of the year means its share of the oil market is likely to drop below 30% for the first time since 1991, according to Bloomberg News calculations.
Bloomberg calculated OPEC's market share by measuring crude production from the cartel -- which is subject to output caps -- but not condensates and other natural gas liquids that are excluded from the quotas. Monthly OPEC output was then measured against quarterly global oil demand as estimated by the International Energy Agency.
OPEC nations are bearing the burden of the market-share loss unevenly. Under U.S. sanctions, Tehran and Caracas have seen their production collapse, lightening the effort other members had to make to support high oil prices. Since December, Iranian and Venezuelan output has fallen by almost 1 million barrels a day, hitting its lowest level in about 40 years, according to Bloomberg News estimates.
Other OPEC nations have avoided trouble by simply flouting the rules, virtually pumping at will. Iraq, for example, produced 4.7 million barrels a day in May, matching a record it set in December.
But Saudi Arabia, the group's most important member, is having to make deeper cuts than initially planned, reducing output recently to 9.7 million barrels a day, well below the level of 10.3 million a day it agreed with its OPEC partners.
The price for the benchmark West Texas intermediate crude oil rose 62 cents Monday to settle at $59.09 a barrel. Brent crude, the international standard, rose 32 cents to settle at $65.06 a barrel.
Information for this article was contributed by Kiyoko Metzler, David McHugh and Anthony Mills of The Associated Press; by Nayla Razzouk, Dina Khrennikova, Javier Blas, Stephen Cunningham and Jessica Summers of Bloomberg News; and by David Wickert of Cox Newspapers.
A Section on 07/02/2019