OPEC Panel Looking At Deepening, Extending Oil Cuts
- Author: Zachary Reyes May 21, 2017,
May 21, 2017, 12:43
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. Members of the Organization of the Petroleum Exporting Countries have stated their intentions to keep supply cuts going through next year. West Texas Intermediate for June delivery rose 88 United States cents, or 1.5%, to $50.23 a barrel at 9.59am on the New York Mercantile Exchange.
OPEC members agreed late past year to cut collective production at the start of 2017 by 1.2 million barrels a day for six months.
Saudi Arabia and non-OPEC Russia have said they want an extension to output reductions of nearly 1.8 million barrels per day (bpd) that were initially agreed to run in the first half of 2017.
Bank of America Merrill Lynch pointed out that OPEC is struggling to bring down global stocks but that the cartel's own strong production in the fourth quarter, ahead of the cuts, has made it harder to achieve its goal. "Prices would have been lower if we did not have the production cuts". An OPEC panel is also considering deepening the cuts to help boost prices.
West Texas Intermediate for June delivery gained as much as 72 cents to $50.07 a barrel and traded at $49.94 on the New York Mercantile Exchange at 10:42 a.m.in London. The global benchmark crude traded at a $2.94 premium to July WTI. Russia's Rosneft, the world's top listed oil company by output, is working to be ready to compete on global oil markets after the deal with OPEC on oil curbs expires, Chief Executive Igor Sechin said on Thursday. But in terms of whether this will be sustained-that would depend on "adherence to the supply cuts" and global demand expectations, as well as factors outside of OPEC's control, including US production, he said.
"This is what we have built into our price forecast for the year", he said.
Crude oil had a volatile, two-sided session on Thursday, driven lower early in the day by concerns over USA production, but supported enough to trigger a rally in renewed confidence in OPEC's ability to extend production cuts beyond the June deadline.
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Later on Friday, oil prices would also be steered by the latest weekly US rig-count data from Baker Hughes. On Monday, Saudi Arabia and Russian Federation, two of the world's largest oil producers, said they would do "whatever it takes" to reduce the current oil glut.
Compliance with the current cuts has been high-higher than Ganguli expected.
"An election victory for Raisi would therefore drive oil prices up noticeably", they added.
The downward correction eroded gains from the previous session when prices rose on the back of a drawdown in USA crude inventories and a slight dip in American production. Commerzbank analysts said the result could have "major consequences for the oil market" if conservative cleric Ebrahim Raisi wins the vote.
On May 25, leaders from OPEC and other producing countries will meet in Vienna to decide on output policy.