Nigeria to maintain crude output as cut extended

Equatorial Guinea has been accepted as a new member of the Organization of the Petroleum Exporting Countries (OPEC), according to the Minister of Energy, Industry and Mineral Resources of Saudi Arabia Khalid Al-Falih.

Motorists headed out for extended trips during the Memorial Day weekend are facing moderate gasoline prices as crude oil prices slumped massively after OPEC extended their production cuts through March 2018.

Last week Saudi Arabia and non-OPEC Russia, the biggest of the 24 producers involved - and who also are anything but best friends - backed an extension until April 2018.

He added that the price fall on May 25 "was probably triggered" by "imbalances" in the market with some expecting deeper cuts to OPEC production. But the hoped-for benefits could be short-lived. With prices above $50 from lows of a year ago, they are increasingly moving back into the market. The curbs were meant to last six months from January, but confidence in the deal, which boosted prices as much as 20 percent, waned as inventories remained stubbornly high and USA output surged. That time, OPEC agreed to slash the output by 1.2 million barrels per day from January 1, while non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1 for six months, extendable for another six months.

The cuts are likely to also be implemented by a dozen non-members led by Russian Federation, which has reduced output in tandem with OPEC since January.

"The cooperation between non-OPEC and OPEC countries will continue, as it has already yielded very good results", said Russian energy minister Alexander Novak.

Opec's current deal, agreed at the end of 2016, covers only the first half of 2017.

The price for Brent crude oil was about $53 per barrel at 6 a.m. EDT and moving lower from the previous close.

Miswin Mahesh, an oil analyst at Energy Aspects, told CNBC via telephone that "oil prices are always choppy at this point" when OPEC meetings are happening.

The oil market is also looking for clues as to what OPEC may do in 2018, a year when USA shale output growth is expected to match an increase in demand.

Since mid-2014, when oil hit a high of over $100 a barrel, its value has plummeted to $47 as recently as early May.

A preliminary deal among OPEC nations to extend the supply curbs by nine months would be put to representatives of non-OPEC producers later Thursday, an OPEC source said.

"First, our production is still relatively about 1.5 million barrels on an average although we have had spikes, still below the 1.8 catch point", he said.

That said, we maintain a neutral stance on the oil price near term and highlight important downside risks from a potentially more hawkish Federal Reserve, which is set to meet in June.

  • Zachary Reyes