OPEC, Russia, Others To Consider Extending Oil Supply Cuts

OPEC and non-OPEC producers said today at a meeting in Kuwait they were looking into extending an output cuts deal aimed at stabilising the market, as compliance with the milestone pact increases.

"We need to see conformity across the board", to 100 percent, he told the opening session of the one-day meeting, which includes Russia, Venezuela, Oman, Algeria and Iraq.

The cuts aim to reduce world oil supplies and boost prices that have slumped since mid-2014.

Kuwait's oil minister said the market may return to balance by the third quarter of this year if producers comply fully with their production targets.

"Crude oil challenged support again yesterday but once again found a bid, this time supported by the bounce in stocks", said Ole Hansen, Saxo Bank Head of Commodity Strategy.

Meanwhile, a growing sense that members of the Organization of the Petroleum Exporting Countries and other non-OPEC members must act soon to maintain the credibility of an agreement to curb output that ends in June by extending it until the end of 2017.

After joining major global oil producers in production cuts to stabilize crude prices, Russian Federation has prepared a conservative budget for the next three years based on oil prices of $40 per barrel.

The agreement to cut 1.8 million barrels per day, which came into effect on January 1, 2017, was for six months and is extendable for an additional six months, depending on the status of supply and demand, including global inventories.


In a surprise move on Sunday, a joint committee of ministers from OPEC and non-OPEC producing countries made a decision to examine the possibility of extending production cuts in the second half of 2017.

US crude futures surged to almost a two-week high after the Energy Information Administration (EIA) reported that crude inventories USOILC=ECI rose 867,000 barrels last week, almost half the build expected, as refineries ramped up processing after seasonal maintenance and as imports dropped and exports rose.

This is affirmed by Bank of America, who see USA shale producers having already hedged 30 - 40 percent of production this year, but very little of 2018's volume.

Oil prices ended lower for the fourth week in last five due to the overhang of inventories and consequent reduction of speculative long positions.

Oil inventories are high because of low U.S. demand and higher supply, and the market should rebalance in the second half of the year, Opec secretary-general Mohammad Barkindo said in Kuwait. Non-OPEC countries pledged to cut about half as much.

On Sunday, the OPEC/non-OPEC monitoring committee met in Kuwait and decided that they would keep observing supply and demand fundamentals for another month, a sign that there is still some indecision on which approach to adopt.

Shaybah oilfield complex is seen at night in the Rub' al-Khali desert, Saudi Arabia.


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