Russia, Saudi Arabia back extension of oil output cuts

17 Мая, 2017, 02:32 | Author: Valerie Burke

Oil prices jumped by over 1.5 percent on Monday after the Saudi Arabian and Russian energy ministers said in a joint statement that an OPEC-led crude production cut would be extended from the middle of this year until March 2018.

Crude futures settled higher on Friday, recovering from a five-month slump, after Saudi Arabia said its supports the idea of extending the supply-cut agreement beyond June while the number of active USA drilling rigs rose for an sixteenth straight week.

"We will have to see how much demand picks up as increasing USA output continues to cap crude prices from rising, despite the efforts made by OPEC and its allies to reduce production", Will Yun, a Seoul-based commodities analyst at Hyundai Futures Corp., said by phone. West Texas Intermediate climbed as much as 3.4 percent to $49.45 a barrel on the New York Mercantile Exchange, while global benchmark Brent increased as much as 3.3 percent to $52.52 on ICE Futures Europe. The following month, 11 non-OPEC oil-producing countries pledged to cut another 558,000 barrels a day, bringing the overall reduction to 1.8 million barrels a day.

Longer cuts at already agreed-upon volumes are needed to reduce global inventories to the five-year average, the energy ministers of the world's biggest crude producers said at a joint press briefing in Beijing on Monday.

In November 2016, the OPEC member states reached an agreement to cut oil production by 1.2 million barrels per day in the first half of 2017 to boost global oil prices.

Some analysts doubted that the producers would stick to a prolonged curb.

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"Add the potential default of Venezuelan bonds and the upcoming Iranian election, and we could see more support as prices get back what they gave back in the month of April".

Borneo Oil Bhd pared gains after rising to 19.5 sen earlier to trade unchanged at 19 sen, with 12.7 million shares changing hands for a market capitalisation of RM575.5 million. But predictions by analysts confirmed that this situation would be same for a long time due to increase production of Shell Oil by the producers in the US.

In shades of the ECB's Mario Draghi, the energy ministers of Saudi Arabia and Russian Federation announced, in Beijing no less, that they had agreed to do "whatever it takes" to reduce global oil stockpiles to five-year averages this morning.

The deal still needs two things for it to work, according to Goldman: high compliance and low enough long term prices that will stop US shale producers from putting more rigs to work.

Goldman retained its average Brent price forecast for the third quarter of 2017 at US$57 per barrel.

"We believe that the market won't be able to balance by the year-end", he said.

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