Russia, Saudi call for oil output deal extension

Immediately after the briefing, oil prices began an upward swing to a three week high, gaining almost $2 on the barrel.

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. USA crude lost 8 cents to $48.77 a barrel.

Futures climbed for a fifth day in NY, extending a 2.1 per cent jump Monday after the Saudi and Russian energy ministers said they favour extending curbs until the end of March. They will present their position at a meeting of OPEC and other nations that are part of the agreement on May 25 in Vienna.

Some market watchers now believe exporters must agree to deeper cuts, but a number of analysts say that is not likely.

Kuwait, a Gulf producer usually aligned with the Saudi Opec view, said on Tuesday it supported the proposal. "Therefore, we came to the conclusion that ending [the deal] will probably be better by the end of first quarter 2018". USA crude ended $1.01 firmer at $48.85 a barrel, a 2.1 percent gain.

Oil has gained support from the supply deal but inventories remain high and output from other producers such as the United States is rising, keeping prices below the $60 that Saudi Arabia would like to see.

If OPEC keeps restraining production, stockpiles will fall by 1.5 million barrels a day in the second half.

Under the current agreement that started on January 1, the 13-country OPEC and other producers pledged to cut output by nearly 1.8 million barrels per day in the first half of the year.

The Energy Ministers of Saudi Arabia and Russian Federation said that they had "reached an understanding" that it is necessary to keep surplus crude off the market "until March 31, 2018", in order to stabilize a world oil market that is still oversupplied. Some members of OPEC may pump more than they have promised.

USA drilling activity last week rose to its highest in two years, while US production has jumped more than 10 percent since its mid-2016 trough.

Global benchmark Brent increased by as much as 3.3 per cent to US$52.52 a barrel on ICE Futures Europe and West Texas Intermediate climbed by up to 3.4 per cent, to $49.45 a barrel on the New York Mercantile Exchange.

The country's Energy Ministry has held initial discussions with Russian companies on the matter, he said.

"That said, we are sceptical about Russia's willingness to actively participate in any extended cuts".

  • Zachary Reyes