Saudi Arabia And Russia Deepen Their Alliance For Many Reasons Besides Oil

20 May, 2017, 09:43 | Author: Leticia Walters

However, global oil production was 831,000 barrels daily higher than a year ago and increased by 363,000 barrels per day in the first quarter of the year, it added.

In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices.

Oil settled at two-week highs earlier in the week after energy ministers from Russian Federation and Saudi Arabia surprised markets by calling for an extension to an oil production cap agreement.

Members of the Organization of the Petroleum Exporting Countries (OPEC) earned about $433 billion in net oil export revenues in 2016, the lowest since 2004. Prices gained 41 cents to settle at US$49.07 yesterday, the highest level since April 28.

At the same time, the attempts to curb production has encouraged American drillers to pump more, maintaing the oversupply and countering expected price rise. "Therefore, a drastic downward shift in the market conditions will not lead to a rapid collapse of the United States oil production", reads last week's report from Norway-based consultancy Rystad Energy. The U.S. benchmark for oil is competitive against Dubai crude oil, which had a $2.20 per barrel premium on WTI in early Thursday trading, and drawing the interest from Asian buyers.

Crude oil futures have been volatile as investors expect US shale gas supplies to rise while oil-producing countries continue to cut output to prop up prices. However, even after these refineries became operational again, the markets have not seen a considerable decline in the USA oil inventories, as was expected by the industry experts. Further, countries like Nigeria and Libya, who were exempt from the deal, are likely to ramp up the oil production sharply as their financial and geo-political conditions improve, offsetting the impact of the production cuts by the other cartel members. Data released on Thursday shows that even Saudi Arabia has increased sales in the market by 275,000 barrels a day.

"The markets are really starting to see the effects of the cuts".

"The fall in stockpiles undershot the expectation of a 2.36-million draw", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Traders said news that the campaign to elect President Donald Trump previous year had at least 18 undisclosed contacts with Russians had unsettled investors.

Storage costs have come down and while prices and demand remain stagnant, oil supply remains high.

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