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Opec to discuss extending oil cuts by more than 3 months

[LONDON] Opec and its allies are discussing extending the oil production cuts that expire in March 2018 by more than three months, potentially bringing them well into the second half of next year, according to people familiar with the matter.

An extension of that duration would be needed under the worst-case scenario for the oil market that Opec ministers are now contemplating, the people said, asking not to be named because the talks were private. One option under discussion is a six-month extension, one person said.

Opec and other producers including Russia, Mexico and Kazakhstan pledged to reduce output by about 1.8 million barrels a day to eliminate a global surplus that was weighing on prices. The deal, reached in late 2016, initially called for a six month period, which later was extended with another nine months until the end of March 2018.

Opec and its allies are discussing a further roll over now ahead of a ministerial meeting scheduled for late November in Vienna, with a three-month extension seen as a minimum, the people said. The different scenarios depend on multiple variables, including the level of compliance with agreed cuts by OPEC and its allies, the pace of the oil output recovery in Libya and Nigeria, the strength of global demand, and the pace of the recovery in US shale output.

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Saudi Arabian Energy Minister Khalid Al-Falih last weekend discussed the potential extension of the deal with his counterparts from Venezuela, Kazakhstan and the United Arab Emirates. Al-Falih said longer-lasting curbs "would be considered in due course as market fundamentals may dictate."