Oil prices volatile as Opec reportedly decides to extend production cuts

Oil cartel Opec decided to extend cuts to production until March 2018, according to reports.

A delegate from one of the cartel's member nations said the cuts are likely to be shared by countries from outside the price-fixing group, according to Reuters.

Brent crude futures prices rose by as much as one per cent to reach their highest point since mid-April in early morning trading, but fell steeply after doubts about the cuts emerged.

Futures for the North Sea benchmark rose as high as $54.55 per barrel, before falling below $53 per barrel. Meanwhile the North American benchmark, West Texas Intermediate, rose to highs of $51.93 per barrel before dipping as far as $50.08 per barrel.

The Organization of the Petroleum Exporting Countries (Opec) is meeting in Vienna to discuss the plans for the cuts, with the length of an extension still at issue but broad agreement on the path already reached.

The extension would come after a landmark deal at the end of 2016 which saw Opec and other countries, including Russia, agree to cut production by 1.8m barrels per day in the first half of this year.

Saudi Arabia’s powerful oil minister, Khalid al-Falih, is chair of the group as the cartel’s largest member looks to shore up the oil price by reducing the size of oil inventories. Falling prices had severely damaged oil-producing economies reliant on the commodity wealth for government revenues.

Addressing the delegates before the meeting, al-Falih said: "We have more work to do in lowering inventories toward the last five-year average, but we are on the right track."

Iran’s oil minister yesterday confirmed the cuts were likely to go ahead, according to Iranian news agency Shana.

He said “It is apparent that there is an agreement between members of the organisation to extend the body's output cut plan."

Brent crude oil prices have rallied from lows of below $48 per barrel in the first week of May.

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