Oil Futures Bullish On Continued Production Cuts
- Author: Zachary Reyes May 24, 2017,
May 24, 2017, 13:15
Energy ministers from the world's two top producers said that supply cuts should be prolonged for nine months, until March 2018.
Extending the cuts at already agreed-upon volumes is needed to reach the goal of trimming global stockpiles to the five-year average, Kuwait's Oil Minister Issam Almarzooq said in an emailed statement on Tuesday.
Brent crude oil gained 30 cents to touch $52.12 a barrel, while the USA light crude traded 25 cents higher at $49.10 against their last close, reported Reuters.
The statement comes ahead of Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna on May 25 when leaders of the member nations would consider extending output cuts agreed with 11 non-members including Russian Federation in December past year, Reuters added.
Russian Federation and Saudi Arabia, the largest of the 24 nations that agreed to a deal to cut production for six months starting in January, are reaffirming their commitment to the deal amid growing doubts about its effectiveness. However, Bozumbayev said Kazakhstan would find it technically hard to keep output down because it started bringing a large new field online past year. OPEC ministers plan to meet on May 25 to decide whether to extend cuts in their production beyond June.
The U.S. benchmark ended Monday's session with gains of $1.01, or 2.1%, after hitting its highest since April 28 at $49.66.
WTI Crude is now trading up 3.03 percent at $49.29 per barrel, with Brent Crude up 2.93 percent at $52.33 (1126GMT).
"Rebalancing is essentially here and, in the short term at least, is accelerating", the International Energy Agency said in its monthly report on Tuesday. This number will grow if the output cut extension is agreed by everyone.
Immediately after the briefing, oil prices began an upward swing to a three week high, gaining almost $2 on the barrel.
"With the United States rig count increasing for its 17th consecutive week, I think we can safely say that the crude oil battle is well and truly on", said Mr Matt Stanley, a fuel broker at Freight Investor Services in Dubai.
Goldman said that beyond the ongoing rise in US oil production, which is up over 10 percent since mid-2016 to 9.3 million bpd, there was also an increase in output from within OPEC by members who were exempt from the cuts, or where forceful disruptions had ended, including Libya and Nigeria.