Venezuela supports extension of OPEC, non-OPEC production cut

Prices are up by 2 per cent since the announcement of the planned extension on Monday, compared with an over 15 per cent jump in the two days following the announcement of the initial cut on November 30, 2016.

Global benchmark Brent crude was up $1.41 at $52.25 a barrel by 3.28pm GMT, having touched $52.63, the highest since April 21.

While Kuwait supported the announcement, other Organization of the Petroleum Exporting Countries (OPEC) members and key oil producers are set to meet on 25 May in Vienna to decide the future course. At the same time, at a meeting of the OPEC countries and countries outside of the cartel in Vienna on May 24-25, Russian Federation is going to propose maintaining the current parameters of the agreement.

An OPEC source familiar with the market situation told Reuters earlier on Monday that oil inventories in floating storage have declined by one-third since the start of the year.

Amid the cutbacks, production in the U.S., which isn't part of the agreement, has risen to the highest level since August 2015. While the curbs by the producers is working, "we are not where we want to be" on the initial goal of bringing global inventories down "gently" below the 5-year average, Al-Falih said.

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

The briefing took place as Russian President Vladimir Putin was in Beijing on an official visit. "Preliminary consultations show that everybody is committed" to the output agreement and no country is willing to quit, said Novak. Last year they agreed the first joint output cuts in 15 years despite major political differences, including their support for opposite sides in the Syrian war. Together, they control around 20 million bpd in daily output, equivalent to a fifth of daily global consumption. According to them, when the stock price of oil falls below $50 per barrel, people tend to purchase the commodity and sell it when it reaches to $50 per barrel or more than that.

During talks previous year on the supply cut deal, Iran successfully argued it be allowed room to pump more as it lost market share while under Western sanctions, raising the question of whether Tehran would sign up for a longer supply cut. There's still concern that a surge in USA production, together with an increase in Libyan output and signs of recovery in Nigeria, may undercut the Organization of Petroleum Exporting Countries' strategy to stabilize the market and prop up prices.

  • Zachary Reyes