Kuwait backs call to extend oil output cuts

19 May, 2017, 12:10 | Author: Leticia Walters
  • Oil jumps after Saudis, Russia say supply cut to be extended to March 2018

In a joint statement the two countries said an extension to March 31, 2018 was needed "to ensure market stability, predictability and sustainable development".

Still, an increase in Libyan output, together with a surge in US production and signs of recovery in Nigeria, may undercut the Organization of Petroleum Exporting Countries' strategy to re-balance the market.

"Saudi Arabia seems very determined to push oil prices higher by making this joint statement now", said Mr Oystein Berentsen, managing director of oil trading company Strong Petroleum.

OPEC and some non-OPEC producers agreed in December to cut output by 1.8 million barrels per day for six months to help stabilize oil prices.

Energy ministers from the world's two top producers said that supply cuts should be prolonged for nine months, until March 2018.

Venezuela is undergoing a wave of unrest with protesters angry at an economy in crisis, with food and medicine shortages and soaring inflation. Oil has surrendered about half its gains since the producers' accord to cut output late previous year. That would be longer than the optional six-month extension first agreed. Thus, OPEC countries reduced the average daily production by nearly 1.2 million barrels. OPEC is due to meet with fellow producers on May 25 to decide on the extension.

The agency trimmed its estimate for first-half global demand growth by 115,000 barrels a day, citing weaker consumption in "previously solid countries" like India and the USA, yet kept the full-year growth forecast steady.

US drilling activity RIG-OL-USA-BHI last week rose to its highest in two years, while US production has jumped more than 10 percent since its mid-2016 trough.

According to Novak, Moscow isn't out to significantly impact the oil price.

"Of course, things will change elsewhere in the balance, and today the most closely watched data point on the supply side is U.S. crude production", the IEA said.

At the same time, at a meeting of the OPEC countries and countries outside of the cartel in Vienna on May 24-25, Russian Federation is going to propose maintaining the current parameters of the agreement. Nymex crude oil futures prices are challenging $50 a barrel Monday morning. Libya's crude production has risen to more than 800,000 barrels a day as fields restart, the most since 2014.

USA drilling activity last week rose to its highest since April 2015.

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