Oil Settles Up Slightly On View OPEC Will Extend Output Cuts
- Author: Zachary Reyes May 24, 2017,
May 24, 2017, 14:07
Data from the U.S. Energy Information Administration indicate that maintaining the curbs into the first quarter of 2018 would bring stockpiles back in line with the five-year average - OPEC's stated goal. Congress created it in 1975 after the Arab oil embargo caused fears of long-term motor fuel price spikes that would harm the US economy.
As oil spot prices have been lower than futures prices since the end of 2014, shale oil producers have been able to sell their oil at higher prices than major OPEC producers.
OPEC members Iraq and Algeria as well as top non-OPEC producer Russian Federation also support a nine-month extension but some Gulf OPEC members including Kuwait and the United Arab Emirates have pointed to a need for further analysis.
"The Saudi oil minister's view seems accurate and no serious objection is expected if at all", said one delegate.
According to latest numbers, the U.S. oil production has reached 9.305 million barrels per day for the week ending on 12th May 2017.
U.S. President Donald Trump's proposal to sell 270 million barrels of oil from the U.S. petroleum reserve could have the unintended outcome of actually helping OPEC rebalance global petroleum markets.
The key question is: will OPEC members agree to deepening their cuts when they meet in Vienna later this week?
Last November, major oil producers agreed to cut output as a response to the global supply glut that had been pushing down prices for nearly two years.
Given the importance of Asian market for OPEC, he also emphasised on "Asian Dividend" rather than paying "Asian Premium". Falih also arrived in Vienna on Tuesday but made no comment to reporters.
The deal "has been working and I know it will work even better for the second half", he said, before traveling to the Austrian capital. If sales from the strategic reserve pressure far-dated futures contracts, shale producers would be less inclined to add more rigs.
Deutsche Bank said the market had priced in a nine-month extension. Al-Luaibi had previously said that Iraq would support a six-month extension.
The positives from that proposal outweighed the negatives from news that President Donald Trump's budget plan to sell up to half America's Strategic Petroleum Reserve.
OPEC and its allies were poised to continue their production cuts for another nine months after Iraq backed an extension, removing one of the last remaining obstacles to an agreement.
Analysts polled by S&P Global Platts forecast a decline of 2.8 million barrels in crude-oil stocks for the week ended May 19. "The deeper cut theory has gotten some play recently and considering the discipline with production cuts has been a bit of a surprise".