Oil Prices Rise as Talk of Longer, Deeper Cutback Consensus Grows

May 23, 2017, 14:43
Oil Prices Rise as Talk of Longer, Deeper Cutback Consensus Grows

"The common declaration made by the Russian and Saudi ministers (last week) on the intention to prolong the OPEC+ production cuts is the best testimony that leading oil producers are capable to striker deals despite political differences", said Yusufov, who is now head of a Russian oil fund, called Fund Energy, which he founded in 2011.

Saudi arrivals in April were down 3.9 per cent from a year ago to 3.96 million tonnes, or about 963,000 bpd, down from the 1.07 million bpd rate in March, customs data showed.

The oil producers also aim to facilitate a deeper cut in output, OPEC sources told Reuters on Friday. Al-Luaibi had previously said that Iraq would support a six-month extension.

Oil has climbed as Saudi Arabia and non-OPEC member Russian Federation rally support for a nine-month extension to the output-cut deal by the Organization of Petroleum Exporting Countries and its allies.

Deutsche Bank said the market had priced in a nine-month extension.

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IHS's Diwan presented an estimate that USA output this year will be about 500,000 barrels a day higher on average than in 2016, the delegates said, asking not to be identified because the meeting was private.

Brent crude has spiked 12% this month after Russian Federation and Saudi Arabia - the world's top oil producers - indicated that they would extend supply cuts into 2018. The exact duration of an extension will be discussed in Vienna on May 25, said OPEC Secretary-General Mohammad Barkindo.

The initial deal failed to bring supply back within the limits of the five-year average, which is considered by OPEC to be a fair measure of oil's fundamentals.

Traders said that as any sales would only start next year and be gradual, their impact would be bigger on longer-term prices rather than those for immediate delivery.

"A 9-month extension would normalize OECD inventories by early 2018, in our view, but we see risks for a renewed surplus later next year if OPEC and Russia's production rises to their expanding capacity and shale grows at an unbridled rate", the USA bank added.

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Brent futures traded 1 percent up around $54 a barrel on Monday at 1455 GMT.

U.S. crude production has surged about 10 percent since mid-2016 to 9.3 million barrels per day due to increased shale production.

In November 2016, the OPEC 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.

"The binding force to sustainably slow shale growth lies on the funding side", Damien Courvalin, a Goldman analyst, wrote in the research note to clients.

In fact, the rapid response by the United States shale sector to the OPEC deal helps explain why oil prices retreated earlier this month.

More news: United States envoy Nikki Haley

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