Russia is aligned with OPEC on extending output cuts, Nigerian oil minister says

Key Points
  • Nigerian Energy Minister Emmanuel Ibe Kachikwu said Russia and OPEC are agree on extending oil production cuts.
  • Oil prices fell sharply on Wednesday after energy ministers sent mixed signals about the length of the extension.
  • A group of 24 producers that agreed to the deal meet tomorrow and will also discuss winding down the deal, Kachikwu said.
Russia and OPEC are aligned on extending output cuts, Nigerian energy minister says

Nigeria's energy minister on Wednesday insisted that OPEC and Russia are in agreement on extending oil production cuts, even as the market sold off on uncertainty over the nearly one-year-old deal.

Oil prices fell sharply at midday on Wednesday after energy ministers sent mixed signals about extending an agreement that has kept about 1.8 million barrels a day off the market since January. The goal of the coordinated output cuts is to shrink huge global stockpiles of crude and stabilize oil prices following a three-year slump.

A committee that monitors the deal recommended that a group of 24 oil-producing nations participating in the accord extend it by nine months. But Russian Energy Minister Alexander Novak declined to say whether he supported that option, stoking fears about Russia's commitment that have weighed on prices all week.

Reports that OPEC is considering either a six-month extension or a nine-month extension to be reviewed in June have roiled the market. Traders entered the week expecting the deal, which expires in March, to be extended through the end of 2018 without caveats.

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Nigerian Minister of Petroleum Resources Emmanuel Ibe Kachikwu, who attended the Wednesday meeting but does not sit on the committee, suggested there is only one course of action under consideration when asked by CNBC if all three options are on the table.

"No, I think we're fairly aligned. I think we left that meeting fairly aligned," he said. "Obviously we need to bring in the bigger body tomorrow to look over our recommendations that have been made and then go from there."

Asked explicitly whether OPEC members are in agreement, but Russia is not aligned with OPEC, he said, "No, we're all aligned."

He suggested that too much attention has been paid to the idea of reviewing the a nine-month extension in June. Reports of a mid-year review surfaced on Tuesday, prompting some analysts to accuse the producers of settling for a de facto three-month extension.

"There's actually only one option," Kachikwu said. "Even if you do take full-year rollover, you will need to review that according to market behavior, so they are not necessarily apart."

Iraqi Oil Minister Jabbar al-Luaibi also told CNBC earlier on Wednesday that a nine-month extension will be announced on Thursday.

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Kachikwu, who has previously served as OPEC president, said the full group of producers participating in the agreement would consider possibilities for winding down the deal when they meet on Thursday.

OPEC and its allies have not said much publicly about how they intend to exit the agreement. A sharp increase in production from the 24 participants could flood the market and send oil prices sharply lower.

U.S. crude fell nearly $1 to about $57 a barrel, while was down about 75 cents below $63 a barrel after the Joint Ministerial Monitoring Committee meeting ended on Wednesday. Speaking to reporters after the meeting, Russian Minister Novak did not say whether he backed a nine-month deal.

"The market is not yet balanced and requires a continuation of common actions. And everyone recommended that after April 1 the agreement may be extended. Tomorrow we will discuss the specific details at the meeting of all ministries," he said.