OPEC panel looking at deepening, extending oil cuts, sources say
- Author: Zachary Reyes May 19, 2017,
May 19, 2017, 19:19
Oil prices were heading on Friday for a second week of gains on growing expectations that big crude exporters will extend output cuts to curb a persistent glut in inventories.
Although the storage trade has been less profitable since the OPEC production cuts, much of that oil remains in tanks, said Chris Bake, an executive committee member at Vitol, the world's largest independent trader, during an industry conference last week in London.
On 25 May, leaders from Opec and other producing countries will meet in Vienna to decide on output policy.
OPEC is most likely to extend the current production-cut agreement by six months, Ganguli said, giving this scenario a 75% probability rate.
West Texas Intermediate rose 28 cents to $49.35 per barrel, the highest climb since April 26, while Brent increased 30 cents to $52.51 per barrel.
The main point of discussion being whether to roll over the current production cut agreement.
"I think the cuts are enough to stabilise the market". The contract is heading for a weekly increase of 3.4%.
Still, there are signs that Saudi Arabia, OPEC's largest producer, is keeping markets well supplied.
Both benchmarks increased after the Energy Information Administration reported a decline of 1.8 million barrels in the USA inventory to 520.8 million barrels in the week that ended on 12 May.
Saudi Arabia and nonOpec Russia have said they want an extension to output reductions of nearly 1.8-million barrels per day that were initially agreed to run in the first half of 2017. Eleven non-OPEC countries are participating in the supply cut.
Following a meeting in Beijing, Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said: "The two ministers agreed to do whatever it takes to achieve the desired goal of stabilizing the market and reducing commercial oil inventories to their five-year average level". We could revise our price view higher should production costs begin to pick up at a faster rate than producers can improve efficiency. The U.S. Energy Information Administration said inventories fell 1.8 million barrels in the week to May 12 to 520.8 million barrels.
"We believe the industry is more focused on robust activity at stable oil prices, rather than very high oil prices at this juncture, which is not sustainable over the long run", said its analyst Mabel Tan.