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All you need to know about the OPEC’s oil pricing gimmicks

Dated Brent (ICE) for July dropped sharply 4.63 percent to Dollars 51.46/barrel. When unveiled in December, it helped establish a floor under crude oil prices of around $50 per barrel, though that level has come under threat from the subsequent market recovery in North America.Oil prices plunged almost 5 percent on Thursday after major exporters extended their deal to limit oil production for nine months, disappointing investors who were anticipating deeper cuts.”As expected following comments ahead of the meeting on behalf of Saudi Arabia and Russia, OPEC members have agreed to prolong the existing production curtailment (a cut of 1.8m bbl/d including Russia’s cuts) to the first quarter of 2018″.The deal agreed a year ago saw the group’s member countries reduce production by 1.2 million barrels a day to 32.5 million barrels, effective from January, and it has succeeded in pushing prices back above the $50 benchmark.The price of oil is down further after OPEC and other nations said they had agreed to extend their production cuts for another nine months.Chris Beauchamp at online trading firm IG, described Mr Falih’s belief that greater reductions were not needed as “quaint”, while Alexandre Andlauer of equity research firm Alphavalue said Opec’s strategy was “old-fashioned”.USA crude prices were flat at $48.88 on Friday, after losing 4.8 percent overnight, set to end the week 2.8 percent lower.Oil prices have rallied in the last several weeks on expectations of an extension, but some had been hoping for deeper and longer cuts.Nigeria and Libya will remain exempt from making cuts while Iran would be allowed to retain the right to increase production to the same reference level, around 3.797 million barrels a day, agreed in November a year ago.OPEC accounts for a third of global oil production and includes numerous world’s largest oil exporters such as Saudi Arabia and Qatar. On Thursday, the cartel and other major oil-producing countries extended a production cut that has done little to bolster crude prices.This would force refiners to start using up reserves, pushing up prices at least until production catches back up with consumption.Analysts criticised Opec’s failure to make deeper cuts to production.