Oil slips despite talk of supply cuts being extended into 2018

Owen Stevens
May 20, 2017

The Organization of the Petroleum Exporting Countries (OPEC) members made a decision to reduce output by 1.8 million barrels per day to rebalance the oil market for the first six months of this year.

Higher crude output from the United States should limit any upside to global oil prices through the end of 2018, the US government said on Tuesday.

Saudi Arabia and Russian Federation, in response to the surge in USA shale production, have signalled they intend to continue to extend the deal reached to cut production by 1.8 million barrels per day in November.

OPEC is expected to decide at talks on May 25 whether to extend the current deal to cut production for an additional six-months to the end of the year. Saudi Aramco will reduce supplies to Asian customers by about 7 million barrels in June.

Brent crude futures were at $49.82 per barrel at 0323 GMT on Monday, up 72 cents, or 1.47 percent, from their last close.

Oil prices rose on Thursday, and Brent was firmly back over $50 per barrel, as a fall in USA fuel inventories and a bigger-than-expected cut in Saudi supplies to Asia tightened the market.

Oil capped a third weekly decline on Friday after dropping to levels last seen before the Organization of Petroleum Exporting Countries agreed in November to reduce output.

Official numbers on weekly USA crude and product inventories from the EIA are scheduled to be released 1430 GMT on Wednesday.

US light crude oil, on the other hand, ended up $1.45 higher at $47.33 a barrel.

Investors are now waiting to see if those numbers are confirmed on Wednesday by official figures on weekly USA crude and oil product inventories from the US government's Department of Energy, due out at 1430 GMT.

"We are discussing different options and consider that an extension for a longer period will help to speed up the return of the markets to a healthier condition".

It raised its estimate of total oil supply growth from non-Opec producers this year to 950 000 bpd from a previous forecast of 580 000 bpd.

Russian Federation said yesterday it was discussing prolonging cuts with other producers beyond 2017, without giving a clear timeline.

USA oil production continued to rise, jumping above 9.3 million bpd last week, the highest since August 2015.

Saudi Energy Minister Khalid al-Falih said on Monday the OPEC-led production cut could be extended beyond 2017.

World oil demand growth for 2017 was left unchanged at 1.27 million barrels per day with non-OECD countries leading the growth.

Other reports by VgToday

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