Oil prices build on gains on expectation of extended crude supply cut

Owen Stevens
May 16, 2017

Crude oil prices surged over 3% to their highest level in two weeks after the world's two biggest producers agreed in principle to extend a deal on output restraint through March of next year.

Crude prices hit a three-week high above $52 a barrel today, after top producers Saudi Arabia and Russian Federation agreed to extend output cuts for a further nine months, until March 2018, opening the possibility of extending an OPEC-led deal to support prices further than expected.

The oil market has essentially reached a balance and will continue to accelerate in the near term, the International Energy Agency (IEA) said in its monthly report published Tuesday, just nine days before OPEC's much anticipated ministerial meeting.

Brent for July settlement added 98 cents, or 1.9 percent, to settle at $51.82 a barrel on the London-based ICE Futures Europe exchange on Monday.

This is far beyond the optional six-month extension to the reductions of 1.8 million barrels a day included in the deal signed between OPEC and non-OPEC members last November.

USA bank Goldman Sachs said the deal "will likely further extend the oil price rebound. although the rally so far. has remained modest compared to the move that occurred past year when the OPEC cuts were first announced".

James Woods, global investment analyst at Australia's Rivkin Securities said that oil supplies were likely to remain plentiful despite an extended cut.

In the United States, the top source for global crude supply growth, consumption has weakened and the IEA forecast flat U.S. demand this year.

Stocks moved higher on Monday after energy ministers from Russian Federation and Saudi Arabia called for an extension to an oil production cap agreement. They will present their position at a meeting of OPEC and other nations that are part of the agreement on May 25 in Vienna. I believe that the longer-term traders are out there looking to pick up value below, and if we can stay above the 1.36 handle, I think that eventually they will get involved.

At 15:28 BST, Nymex-priced West Texas Intermediate crude was up 2.97% to $49.26 a barrel.

"It is the situation PENGASSAN finds itself".

"The notice was issued on a Wednesday for the workers to report in Warri on Monday of the following week".

"You are moving your employees without giving them transfer allowances and adequate time to prepare", Agarin explained.

However, the union leaders and management of the company later started closed-door negotiations to resolve the issues.

The U.S. dollar slipped on Monday, losing ground against so-called commodity currencies as oil prices leapt on the prospects for an OPEC-led deal for continued production limits.

Other reports by VgToday

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