OPEC: Kuwait, Saudi Arabia Signal Likely Extension Of Supply Cuts

Owen Stevens
April 26, 2017

West Texas Intermediate crude oil was rising 0.7% early Thursday to $51.21 a barrel, while Brent crude, the global benchmark, was up 0.8% to $53.37 a barrel.

"Surprisingly we are seeing how non-OPEC states improve their compliance with agreements on oil output reduction from month to month", the minister said at the media forum on oil in Abu Dhabi. OPEC ministers plus their non-OPEC counterparts are scheduled to meet on May 25.

Countries participating in the cuts have yet to reach a consensus on prolonging their agreement into the second half of the year, and an extension wouldn't necessarily be for an additional six months, he said. Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB, does not expect OPEC to roll over its cuts, saying it could potentially leave the cartel in a weaker position as it creates a risk "for more stimulus of the USA shale oil sector".

Consensus building to extend cuts. His Kuwaiti counterpart, Essam al-Marzouq, said he expected the agreement to be extended.

Khalid Al Falih, the Saudi energy minister, earlier confirmed that the kingdom had given its backing to the preliminary deal.

Should oil prices keep falling, which looks increasingly likely, many of these companies could be pushed into bankruptcy, weighing not only on the share prices of larger energy companies but on bank stocks given concerns over loan losses.

"We need to see the market going really into deficit for oil prices to rise", Giovanni Staunovo, commodity analyst at UBS Group AG in Zurich, said.

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"Given these sensitive circumstances, it is the right of Iraq to hope for an exemption by the other OPEC member states and have an opportunity to increase its production", Hakim, an influential cleric, said in an interview late on Wednesday.

USA crude production rose by 17,000 bpd to 9.25 million a day last week, according to the EIA. American production is now at its highest since August 2015.

The high supplies are partly a result of other producers, who have not agreed to cut output, increasing exports.

US stock futures were rising Thursday after oil prices rebounded and tensions with North Korea eased.

At the end of December commercial oil stockpiles in the 35-nation Organization for Economic Cooperation and Development totaled 2.98 billion barrels, according to the Paris-based IEA, which advises those countries on energy policy.

"The OPEC Secretariat will send the information to all the countries that are taking part in the agreement and we will discuss the issue during a ministerial meeting on May 24", said Novak.

Other reports by VgToday

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