zoomImage Courtesy: Agritrade Resources

Extension of oil production cuts until March 2018 could affect tanker demand, either via lower crude and product exports, or lesser import demand if high prices moderate demand growth.

Global oil prices were buoyed in the fourth quarter of 2016 by OPEC’s decision to cut production. At their recent meeting, OPEC overcame some members’ objections and agreed to extend the cuts until March 2018, according to Clarksons Research.

Expectations of an extension to cuts boosted oil prices in the run up to the announcement, however, price increases have been moderate so far, and it seems as if the Saudis in particular have been doing their best to curtail domestic oil usage to protect long-haul export customers.

The OPEC cuts have brought a modicum of more bullish sentiment to oil companies’ E&P investment decisions. This has helped offshore markets a little.

The widely-trailed extension to OPEC production cuts boosted oil prices during May, although it remains to be seen if shale production quickly offsets this.

“Oil price dynamics have a mixture of positive and negative effects for shipping, but certainly remain crucial given the key role of oil both for shipping and for the wider economy,” Clarksons said.