Oil Market Is Rebalancing Yet OPEC's Work Not Finished, IEA Says

"This statement shows the commitment by Opec and major non-Opec oil producers to bringing stability to the oil market, in which is essential to have security of supply in coming years", said one of the sources.

At the same time, Brent crude oil futures were up 0.41% at US$52.03 per barrel while the West Texas Intermediate grew 0.41% to US$49.05 per barrel.

Brent for July settlement added 98 cents, or 1.9 percent, to settle at $51.82 a barrel on the London-based ICE Futures Europe exchange on Monday.

USA bank Goldman Sachs said the deal "will likely further extend the oil price rebound... although the rally so far... has remained modest compared to the move that occurred a year ago when the OPEC cuts were first announced". The small move higher Tuesday put both Brent and US futures on track to rise for a fifth day in a row.Kuwait's oil minister, Essam al-Marzouq, backed the previous day's agreement by Saudi Arabia and Russian Federation on the need to extend a crude output cut by OPEC and other producing countries of 1.8 million barrels per day (bpd) until the end of March next year.

"Extending the cuts for another nine months may not eliminate the glut in the market", said Sadad Al-Husseini, a former executive vice president of exploration and development at Saudi Arabian Oil Co., the state producer also known as Saudi Aramco. This is required to stabilize the oil market.

Initially, it had been planned that the deal to cut nearly 1.8 million barrels per day in production and agreed on December 10, will be effective in the first half of this year with possibility of rollover toll the end of 2017.

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.

That is longer than the optional six-month extension specified in the deal, and shows that the battle to reduce overall supply has been more hard than originally anticipated, in part because of rising US production.

API said US crude oil inventories rose 882,000 barrels for the week ended May 12, contrary to analyst forecasts in a Reuters poll for a fall of 2.4 million barrels.

Their latest joint action was spurred by oil prices dropping to under $50 per barrel, below their budget needs. This fluctuation had resulted in the rise of 2.5 percent in the stock price of the crude oil in the commodity market.

  • Zachary Reyes