Saudi says 'committed' to oil market stability

The Organization of the Petroleum Exporting Countries said at the end of November it would cut 1.2 million bpd during the first half of 2017, and then in December reached a deal with non-OPEC producers to cut about 600,000 bpd from their output.

In the report, OPEC pointed to an increase in its members' compliance with the deal, according to figures from secondary sources that OPEC uses to monitor output.

Oil prices were largely steady on Friday, finishing the week with modest gains, but speculators sharply cut long positions during last week's rout, on concerns that an OPEC production cut was failing to reduce a global supply overhang. Russian Federation and 10 other non-OPEC producers agreed to cut half as much. Gasoline supplies fell by 3.06 million barrels to 246.3 million, the lowest level since January.

OPEC's goal is to get inventories closer in line with the five-year average; their production cut deal would need to be extended a good many times at this rate.

"At 32.3 million bpd, the call on OPEC crude during the first quarter of 2017 is higher than average output of 31.9 million bpd so far this year, which could lead to a draw in global inventories", the IEA said, adding that it was not clear if the group will extend its supply agreement.

Investors also are assessing the potential outcome and impact of a gathering of G20 finance chiefs, U.S. President Donald Trump's first budget and a tense election in the Netherlands.

U.S. West Texas Intermediate (WTI) crude was up 29 cents, or 0.6 percent, at $49.15 a barrel by 0541 GMT, having surged 2.4 percent in the previous session while posting its first increase in eight days. Stephen Brennock of PVM oil brokerage said this would be achieved only if OPEC kept supply reductions beyond the first half of 2017. The WSJ reported that sources familiar with the matter say that Saudi officials can not "support the output cuts for long without help", as low oil prices combined with a cutback in output are hurting state finances.

Goldman said in a research note that market rebalancing is still progressing, and it saw demand for oil finally exceeding supply in the second quarter aided by production cuts, despite an expected rise in US shale output.

USA crude prices will climb to at least $64/bbl in the third quarter as the surplus begins to disperse, Francisco Blanch, head of commodities research at Bank of America, said in a report on March 10. AFP | Saudi Arabia is committed to stabilising the global oil market, the energy ministry of the world's biggest oil exporter said on Tuesday, as prices fell below $48 a barrel.

Oil slid after Opec reported a rise in global crude stocks and a surprise output jump from its biggest member, Saudi Arabia. For more on crude oil prices and its drivers, read Part 1 of this series.

"Certainly, I have made clear that the excessive production that I saw coming out of shale three, four years ago can not be absorbed by the global market", Al-Falih said.

  • Zachary Reyes