Oil stable on expectations of extended OPEC-led production cut

"That is the most important condition for stability", he said at a separate press conference in Beijing. Production fell due to major producers' production cut deal. This fluctuation had resulted in the rise of 2.5 percent in the stock price of the crude oil in the commodity market.

The main reason why oil prices remain low is that supply outstrips demand.

The world's oil stockpiles increased only slightly in the first quarter and are set to decline in the second as demand picks up seasonally and OPEC constrains output, the International Energy Agency said Tuesday in its monthly report.

Current Oil Minister Bijan Zanganeh, speaking on 6 May, said he believed producers were likely to extend the Opec-led deal although he did not give a timeframe, and added $55 was a suitable price for oil.

Overall sentiment held firm and June WTI futures traded around $49.15 p/b at the United States open with July Brent trading at $52.10.

Saudi oil minister Khalid al-Falih said Monday the deal extension would have the same volume allocations that were included in the December agreement. Benchmark Brent oil prices rose, trading up $1.39 at $52.23 per barrel by 1407 GMT as the market had previously expected the cuts to be extended by as little as six months.

The first source familiar with Iranian thinking said it was necessary to support prices to ensure there is enough investment in supplies to avoid shortages in future, echoing a view often expressed by Saudi Arabia.

West Texas Intermediate, the USA benchmark for the price of oil, was up 3.5 percent to $49.57 per barrel.

According to the June nomination plans, Aramco will cut supplies by 1 million barrels each to Southeast Asia, China and South Korea, a source, who has knowledge of the nominations but did not wish to be identified, told Reuters. They will present their position ahead of a meeting between OPEC and other nations that are part of the agreement later this month in Vienna.

Under the current agreement, the Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, and other producers including Russian Federation pledged to cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year.

Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said: "The big runup yesterday was based on the announcement from Saudi Arabia and Russian Federation".

  • Zachary Reyes