Oil climbs above $50 as OPEC expected to prolong curbs next week
- Author: Zachary Reyes May 21, 2017,
May 21, 2017, 15:55
While Russia and Saudi Arabia said this week they're in favor of extending output curbs until March to shrink global stockpiles, Societe General SA said this isn't a "game changer" for the oil price.
On Friday the U.S. Commodity Futures Trading Commission said money managers cut their net long U.S. crude futures and options positions in the week to May 16 to their lowest level since November.
The Opec ECB does not set policy.
There were source reports that the OPEC panel is considering both a potential extension and deepening of production cuts at next week's meeting. Algeria, which was instrumental in crafting Opec's historic output deal past year, has cut production by 55,000 barrels a day, according to Boutarfa, who sees field maintenance in May and June trimming its output by a further 15 per cent.
‧ Spring started with USA drivers consuming a record amount of gasoline, the American Petroleum Institute said on Thursday, a positive sign for oil markets counting on U.S. demand to help ease a supply glut.
Earlier, Saudi Arabia and Russian Federation made a joint statement, saying during the OPEC meeting to be held May 24-25, they will propose the extension of the output cut deal by nine months.
"Production may increase by more than the 500,000 barrels a day which was the April consensus estimate".
It said OPEC-led cuts take about three quarters to start drawing down inventories but USA shale producers can ramp up output in just four quarters to fill in the gap left. This week's EIA Petroleum Status report saw a draw of 1.8 million barrels from crude stocks, down from last week's 5.2 million barrel draw, and is also helping give bulls their conviction in the most recent rally in crude prices.
Shale production is on the increase this year with total United States production now above 9 million barrels a day.
OPEC members may decide to end the output-cut agreement altogether. It's been months of the same headlines, and while the decreased supply from OPEC certainly helps support crude prices worldwide, one has to wonder how much longer they can go without chasing their production curve (lower prices mean you must sell more to make the same revenue stream).
Meyer is optimistic that demand will drive the market in the months to come.
'Even if we extend the cuts just at the current level, they should be enough to support the price in the range that we're looking at-about $55 a barrel/ for Brent. Otherwise all the efforts of the last six months (and possibly next nine months) will be for nothing. Further, countries like Nigeria and Libya, who were exempt from the deal, are likely to ramp up the oil production sharply as their financial and geo-political conditions improve, offsetting the impact of the production cuts by the other cartel members.
OPEC and other producers are due to discuss an extension during an OPEC meeting on Thursday.