Oil Holds Advance as Saudis, Russia Favor Output Cut Extension

"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.

"We are of the camp that the extension cuts might not be enough - they might need to extend the cuts and to increase them to stabilize this market", said Oliver Sloup, director of managed futures at iitrader.com.

OPEC members agreed in November to cut 1.2 million barrels a day of oil production, and several non-members, including Russian Federation, agreed in December to contribute a combined 600,000 barrels a day of output reductions. The deal prescribes the possibility of extension.

James Woods, investment analyst at Rivkin Securities, said world oil supplies would probably remain plentiful, even if OPEC extended the production cuts.

Under the agreement, Opec countries were to cut production by 1.2 million barrels a day, while the Russian-led non-Opec nations agreed to reduce output by 600,000 barrels a day.

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

"Our view is based on oil prices remaining relatively stable at the US$50 per barrel levels in 2017, enough for oil majors to restart their capex plans, considering the lower cost of production and better efficiencies in the sector".

At the same time, Brent crude oil futures were up 0.41% at US$52.03 per barrel while the West Texas Intermediate grew 0.41% to US$49.05 per barrel.

"Our goal is to balance the market and to remove the surplus (from stocks)", Novak told reporters in St Petersburg.

Earlier this month, Saudi Arabia's oil minister indicated that his country would back an extension to the cap.

But, this would depend on how much low-priced USA shale producers would raise production. Some analysts said that USA production could still threaten to disrupt the market balance unless the cuts were deepened.

On the demand side, The IEA reiterated its forecast rate of growth at 1.3 million bpd for this year, to a total 97.9 million barrels, although over the first half of the year demand will grow more slowly because of India, the U.S., Germany, and Turkey.

  • Zachary Reyes