– This is the script of CNBC's news report for China's CCTV on May 26, Friday.
Welcome to CNBC Business Daily, I'm Qian Chen.
Oil markets tumbled in the previous session when OPEC and allied producers extended output cuts.
Crude oil plunged 5 percent following the announcement, and held its losses early on Friday.
At Thursday's meeting in Vienna, the Organization of the Petroleum Exporting Countries and some non-OPEC producers agreed to extend a pledge to cut around 1.8 million barrels per day (bpd) until the end of the first quarter of 2018.
The initial agreement would have expired in June this year.
However, the agreement disappointed investors who had been betting on longer or larger supply curbs.
Analysts told CNBC that the price falls were a result of some expectations ahead the meeting for longer or deeper production cuts.
For doubters, the production cuts and rising prices threw a lifeline to U.S. shale producers and encouraged them to ramp up drilling even faster, jeopardizing the long-term market balance.
And by boosting their own production so much while the accords were still being negotiated, OPEC and non-OPEC countries actually made their task harder and pushed back the rebalancing process.
Now it has been 6 months since OPEC started to implement the production cut agreement but its support for oil prices has been relatively limited - oil prices fell to $45/barrel earlier this month, but then bounced back on the hope of an extention of the agreement.
Now, can we see oil pices keep staying above the key level of $50?
Energy research firm Wood Mackenzie thinks so. Indeed, it expects a narrower gap between global demand and supply.
[SUSHANT GUPTA Wood Mackenzie] "But if you think about it for 2017.With this production cut in place, we only expect global supply to grow by 200,000 barrels per day. Now, if you look at the demand growth, our forecast is 1.3 million barrels per day. So theres a meaningful drawdown in increase and we expect Q3 and Q4 of 2017, we should lift the price back up, and we are expecting average for 2017, Brent will average on $55 per barrel."
Surging U.S. production, spurred by higher oil prices, combined with weak fuel demand and persistently robust OPEC exports in the first half of the year to offset the cartel's production cuts. That has left global stockpiles near record highs. But some believe that yesterday's meeting will highlight a need for long-term cooperation with non-Opec producers, especially Russia, which will face an upcoming election in 2018.
[Alexander Novak | MINISTER OF ENERGY OF RUSSIA] "With regards my own forecasts, I think that within the next two months before the next meeting of the ministers in the JMMC, we will see a continuation of the rebalancing in the market, a reduction of inventories because there is a period of increase in demand and when excess volumes leave the market that has a positive influence on the rebalancing of the market."
OPEC is trying to drive crude stockpiles in developed nations down to the five-year average.
They currently stand about 300 million barrels above that level.
During the meeting, OPEC also discussed extending the cuts through June 2018 if the market deteriorates, sources told Dow Jones.
That option would be decided near the end of the nine-month extension and could be triggered by high global stockpile levels and low oil prices, the sources said.
CNBC's Qian Chen, reporting from Singapore.