Oil prices rise as Saudi and Russian Federation agree to prolong output curbs

Oil jumped more than 2% to its highest in more than three weeks on Monday, topping $52 a barrel after Saudi Arabia and Russian Federation said that supply cuts need to last into 2018, a step towards extending an Organization of the Petroleum Exporting Countries (Opec)-led deal to support prices for longer than first agreed.

Saudi Arabia and Russian Federation said on Monday they agreed on the need for a 1.8 million barrels per day (bpd) crude supply cut to be extended by nine months, until the end of March next year.

Extending the curbs at already agreed-upon volumes is needed to reach the goal of reducing global inventories to the 5-year average, the energy ministers of the world's biggest oil producers said in a joint press conference.

OPEC and some non-OPEC producers agreed in December to cut output by 1.8 million barrels per day for six months to help stabilize oil prices. The decision for extending the oil production cut was mutually agreed upon by the two major oil producing countries and all the active members of the OPEC. The deal prescribes the possibility of extension. Saudi Arabian production in April average 9.97 million barrels per day, nearly 1 percent below its quota under the multilateral deal.

After the price of oil started to plunge three years ago, Opec - in particular Saudi Arabia - stood by, hoping the financial pressure on U.S. shale would force it to cut back.

The two countries, along with nations in the Organisation of the Petroleum Exporting Countries (OPEC) and some non-OPEC countries are set to review current limits later this month. However, Bozumbayev said Kazakhstan would find it technically hard to keep output down because it started bringing a large new field online past year.

Borneo Oil Bhd pared gains after rising to 19.5 sen earlier to trade unchanged at 19 sen, with 12.7 million shares changing hands for a market capitalisation of RM575.5 million.

The other key outside market on Monday morning sees the USA dollar index trading lower.

Iraq's Ministry of Oil reported that revenue from crude oil accounts for 95% of Iraq's budget.

Goldman said that beyond the ongoing rise in USA oil production, which is up over 10 percent since mid-2016 to 9.3 million bpd, there was also an increase in output from within OPEC by members who were exempt from the cuts, or where forceful disruptions had ended, including Libya and Nigeria.

  • Zachary Reyes