Russia, Saudi Arabia keen to keeping oil cutbacks

Owen Stevens
May 19, 2017

Oil rose more than 2 percent on Monday to $52 a barrel after top exporter Saudi Arabia and Russian Federation said supply cuts needed to last into 2018, a step towards keeping an OPEC-led deal to support prices in place longer than originally agreed.

Oil futures were up in North American trading on Tuesday, with prices headed closer to daily highs reached in the prior session, as investors looked ahead to weekly data from the USA on stockpiles of crude and refined products.

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 yesterday.

"The two ministers agreed to do whatever it takes to achieve the desired goal of stabilising the market and reducing commercial oil inventories to their five-year average level", the statement said.

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. Higher oil prices benefit Middle East oil producers like Iraq National Oil Company and Oman Oil Company.

In its monthly oil market report, the Paris-based group noted Libya has raised oil production to 800,000 barrels a day, the highest point in three years, according to its preliminary data.

"We are of the camp that the extension cuts might not be enough - they might need to extend the cuts and to increase them to stabilize this market", said Oliver Sloup, director of managed futures at iitrader.com.

Both contracts slid during the session to the lowest since November 30, the day OPEC agreed to cut supply.

Kazakhstan, the biggest producer in the former Soviet Union after Russian Federation, isn't ready to join an extended accord automatically, its Energy Minister Kanat Bozumbayev said Monday, according to Interfax. The agreement was to run for the first six months of 2017, with a possible extension for the second half of the year.

US drilling activity last week rose to its highest in two years, while USA production has jumped more than 10 percent since its mid-2016 trough. There's still concern that a surge in USA production, together with an increase in Libyan output and signs of recovery in Nigeria, may undercut the Organization of Petroleum Exporting Countries' strategy to stabilize the market and prop up prices.

Other reports by VgToday

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