Riyadh, Moscow agree to extend oil output cuts
- Author: Salvatore Jensen May 29, 2017,
May 29, 2017, 17:08
Brent crude, the global benchmark, had risen $1.50 to $52.34 a barrel by 1152 GMT and traded intraday at $52.52, the highest since April 24.
Brent for July settlement added 78 cents to $51.62 a barrel on the London-based ICE Futures Europe exchange.
James Woods, investment analyst at Rivkin Securities, said world oil supplies would probably remain plentiful, even if OPEC extended the production cuts.
Following the meeting in Beijing, Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said: "The two ministers agreed to do whatever it takes to achieve the desired goal of stabilising the market and reducing commercial oil inventories to their five-year average level".
"When the two biggest oil producers of the world reach a consensus on the extension of a supply cut, the market will listen", Tamas Varga, of oil broker PVM, said in a report.
In November 2016, OPEC member states reached an agreement to cut oil production by 1.2 million barrels per day in the first half of 2017 to boost global oil prices. Russian Federation pledged to cut production by 300,000 barrels daily.
According to Naeem Aslam, the chief analyst at United Kingdom online broker Think Markets, despite the optimism that sent oil prices higher yesterday, traders will eventually shift their focus back to the output deal's actual effect on the supply glut.
"This statement shows the commitment by OPEC and major non-OPEC oil producers to bringing stability to the oil market, in which is essential to have security of supply in coming years", said one of the sources. Beyond the element of surprise from today's announcement, and the need for broader ratification by other participants, we believe that such a moderate oil price response is consistent with. Rigs targeting crude in the US increased for a 17th week to 712, the highest since April 2015, Baker Hughes data showed on Friday.
In the first quarter of 2017, "the oil market was nearly balanced", the International Energy Agency said in its latest monthly report.
US drilling activity last week rose to its highest in two years, while USA production has jumped more than 10 percent since its mid-2016 trough.