OPEC agrees to extend oil production cut into next year

Oil leaders agreed to extend production cuts until the end of next year on Thursday, an uncharacteristically united front for the notoriously fractious group.

Earlier this year, the oil cartel agreed to pump out 1.8 million barrels less oil every day, in an attempt to stabilize prices. That seems to have worked, as oil has rallied to its highest point in 2.5 years in recent months.

A barrel of the North American crude oil benchmark was changing hands at $57.14 US on Thursday, slightly off its recent highs.

• OPEC allies likely to extend production cuts

Iranian Oil Minister Bijan Zanganeh told reporters the Organization of Petroleum Exporting Countries had agreed to extend the cuts by nine months until the end of 2018, as largely anticipated by the market. 

But the group is still meeting with non-OPEC member Russia, which has been working with the cartel in recent months against a common enemy: U.S. shale producers.

"If producers in the U.S. increase their rig count over the next few months due to higher prices then I expect another price collapse by the end of 2018," said Scott Sheffield, executive chairman of Pioneer Natural Resources Co., one of the largest producers in the Permian Basin of Texas and New Mexico, the largest U.S. oilfield.

Russia has begrudgingly gone along with the notion of pumping less oil, but has been pushing for a clear message on how to exit the cuts.

"We need to work out a strategy for 2018," Russian Energy Minister Alexander Novak said ahead of a meeting with OPEC leaders that started around 10 a.m. ET on Thursday.

• OPEC says it's winning the war on cheap oil

"When we get to an exit, we are going to do it very gradually … to make sure we don't shock the market," Saudi Energy Minister Khalid al-Falih said before the same meeting.

Russia needs much lower oil prices to balance its budget than OPEC's leader Saudi Arabia, which is preparing a stock market listing for national energy champion Aramco next year and would hence benefit from pricier crude.

Economist Todd Hirsch told CBC News in an interview ahead of the meetings that despite being a non-member, "Russia is the elephant in the room," at the summit. "They have not been as co-operative when it comes to supply cuts."

"Indications are that [Vladimir] Putin isn't quite as willing to play nicely in the sandbox with the other OPEC nations," Hirsch said, "and if Russia doesn't co-operate, what's the point."