Saudis, Russia Favor Extending Oil Cuts Until End March 2018
- Author: Zachary Reyes May 19, 2017,
May 19, 2017, 16:01
The Saudi-Russia announcement on Monday will probably extend a price rebound that began last week, though the rally is "modest" compared to the increase when OPEC cuts were first agreed to late a year ago, Goldman Sachs analysts said in a report.
Benchmark West Texas Intermediate crude oil for June delivery traded up almost 3% this morning to $49.25, while Brent crude for July delivery traded up 2.9% at $52.32.
Russian Federation and Saudi Arabia, the largest of the 24 producers that agreed to cut output for six months starting in January, said on Monday that they favor a nine-month extension of the reductions.
With both Saudi Arabia and Russian Federation, the world's two largest producers, behind an extension, the prolonged cuts appear to be a done deal, even before the May 25 meeting.
Brent crude oil was up 30 cents at $52.12 a barrel by 1335 GMT. "[But] compliance needs to remain high, and long-term oil prices need to remain low to prevent shale producers from ramping up investment significantly more".
During talks past 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.
"I feel optimism because our main partner in this process, and our main partner without doubt is Saudi Arabia, has fully implemented all the agreements that took place up to now, and secondly, Saudi Arabia wants to maintain stable and fair prices for oil", Putin said.
OPEC and other major producers have reached a preliminary agreement to extend limits on output, the state-run Kuwait News Agency reported on Sunday, citing a statement by Oman's Oil Minister Mohammed Al Rumhy.
Prices are up by 2% since the announcement of the planned extension on Monday, compared with an over 15% jump in the two days following the announcement of the initial cut on November 30, 2016. Also, U.S. oil production is up more than 10 percent since mid-2016.
HONG KONG (AP) - A strong U.S.jobs report shored up markets on Friday, though energy shares remained under pressure after the price of oil touched its lowest level in nearly six months.
"These combined volumes could largely offset the benefit of the extended cuts", Goldman Sachs said, keeping its average Brent price forecast for the third quarter of 2017 at $57 per barrel.
"As producers in the U.S. are expected to increase output, prices will continue to be restricted from rising".