Russia, Saudi Arabia back extension of oil output cuts

Posted May 16, 2017

Russian Federation and Saudi Arabia are going to hold consultations with the parties to the deal before May 24, according to the joint statement of the two countries.

Current US production is at 9.3 million bpd, up more than 10 per cent since its mid-2016 trough.

Meanwhile, away from the oil market, gold prices rose 0.1% to $1,230.20 an ounce, remaining on track for a third consecutive session of gains.

"We've come to the conclusion that the agreement needs to be extended".

Global benchmark Brent crude was up $1.41 at $52.25 a barrel by 11:28 Eastern, having touched $52.63, the highest since April 21.

Also hurting the mood in markets was the launch early Sunday by North Korea of a new type of "medium long-range" ballistic rocket that can carry a heavy nuclear warhead. Get our markets daily newsletter. This is when the final decision will be made. "That is the most important condition for stability", he said at a separate press conference in Beijing.

"Each side is now adhering to the agreement, and I think that unless the goals are reached there is a big sense to continue this collaboration". Russia, who is not a member of OPEC, agreed in December to cut production by 600,000 barrels.

Rigs targeting crude in the US increased for a 17th week to 712, the highest since April 2015, Baker Hughes data showed on Friday. But American crude inventories are finally showing some signs of shrinking, falling for the past five weeks from record levels at the end of March.

The extension of the cut will initially be on the same volume terms as before, although the ministers said they hoped other producers would join the efforts.

OPEC and other major producers have reached a preliminary agreement to extend limits on output, the state-run Kuwait News Agency reported on Sunday, citing a statement by Oman's Oil Minister Mohammed Al Rumhy. According to both the ministers, the deal aims to rebalance the supply and demand globally with an aim to bring down global inventories to the levels of the 5-year average. This leaves us reiterating our 3Q17 $57/bbl Brent price forecast and, with an increasingly likely extension of the cuts, raises our confidence that the oil market will shift into backwardation in 3Q17. Several non-members, including Russian Federation, agreed in December to contribute nearly 600,000 bpd of output reductions combined.

800,000 barrels a day, the most since 2014, while Nigeria's 200,000-barrel-a-day Forcados pipeline is ready to export again after nearly continuous halts since February 2016. Clearly, reality is biting and neither country likes what it sees in the future should the status quo continue.