Oil prices finished sharply lower on Thursday reflecting disappointment with the decision by the Organization of the Petroleum Exporting Countries (OPEC) to extend production cuts by nine months from investors' side, who had hoped for further cuts.
The West Texas Intermediate for July delivery tumbled 2.46 US dollars to settle at 48.90 dollars a barrel on the New York Mercantile Exchange, while Brent crude for July delivery dropped 2.50 US dollars to close at 51.46 dollars a barrel on the London ICE Futures Exchange.
The decision to extend the capo on oil output was made at a ministerial meeting of OPEC and non-OPEC states in Vienna, Austria, to fight the glut in the global oil market and help float prices, after sinking in the past three years.
In December 2016, OPEC and 11 non-OPEC oil producers, led by Russia, decided for the first time in 15 years on a joint production curb which would see 1.8 million barrels per day (bpd) removed from the market from the beginning of 2017 to July 1.
Now the same cuts will stand for another nine months till the end of 2017 – a decision that has not been welcomed by investors who had hoped the cartel would go for deeper cuts or extend the deal longer.
"We considered various scenarios, from six to nine to 12 months, and we even considered options for a higher cut. But all indications discovered that a nine-month extension is the optimum," Saudi Energy Minister Khalid al-Falih said.
