Oil prices reacted with relief on Thursday, with Brent crude rising about 1.2 percent at one point. The cuts agreed to a year ago, along with strong demand and worries about supply disruptions, have helped raise prices about 20 percent in recent months, to around $64 a barrel.
“This is a win for OPEC,” said Abhishek Deshpande, head of oil market strategy at JPMorgan. An extension, he said, “should help put a floor under prices.”
Saudi Arabia, the world’s largest exporter of oil and OPEC’s de facto leader, wanted the meeting’s outcome to send a strong signal to the energy markets that the cartel’s efforts to reduce supplies and push up prices would continue.
Much was at stake for Saudi Arabia in the OPEC meeting. Crown Prince Mohammed bin Salman has sought to diversify the kingdom’s economy away from oil, while leading a major anticorruption purge and planning for the possible public offering of the national oil company, Saudi Aramco.
Though the crown prince, 32, was not at the talks in Vienna, his plans for transforming Saudi Arabia were on participants’ minds. In the short term, his ambitions depend on robust oil prices, and the Saudi oil minister, Khalid al-Falih, has spent the past year lobbying OPEC colleagues and other producers like Russia to agree to production cuts and stick to them.
The cuts by OPEC members and other producers have amounted to more than 1 percent of global supplies, but they have taken on outsize significance in the markets. Mr. Falih appears to have been acutely aware of the danger that any disappointment might have undone at least some of his work.
“We cannot afford to be complacent,” Mr. Falih said on Wednesday, ahead of a meeting of oil officials to monitor compliance with the agreement. “In order to continue meeting our shared goals, a good deal more hard work and commitment is essential.”
Having been badly burned in recent years by low prices — they fell to around $30 a barrel in early 2016 — most of the group seems inclined to at least verbally commit to going along with Saudi wishes.
In a meeting with reporters on Wednesday, the Iraqi oil minister, Jabbar Ali Hussein al-Luiebi, said his country, now OPEC’s second-largest producer, would continue to support the cuts. He added, however, that they were costing Iraq substantial revenue at a time of huge financial need. The country is looking to rebuild after retaking vast stretches of territory from the Islamic State militant group.
Mr. Luiebi also nodded to a worry that has been on the minds of other OPEC members: that higher prices may, in the end, be self-defeating if they lead to a drilling boom by shale operators in the United States.
He said Iraq was “happy” with the plan, so long as it did not encourage rivals to invest and impact the market. “One should really be very careful,” he added, suggesting that OPEC may begin to discuss an “exit strategy,” relaxing the cuts without sinking the market.
Even the Saudis, who are absorbing a greater share of the cuts, may not want to continue with restraints once the sale of the Saudi Aramco stake is finished. Riyadh has invested more than other OPEC members in developing its oil industry and may try to fully maximize those investments through high production levels.
While the Saudis may want a higher price now, “I think their long-term interests are with a greater market share,” said Jim Krane, a fellow at Rice University’s Baker Institute for Public Policy.