Oil Prices Climb On Hopes Output Cuts Will Be Extended

Marco Green
May 19, 2017

OPEC also raised its forecast for oil supply growth from non-members in 2017 but kept its outlook for global crude demand unchanged at 96.4 million bpd.

Brent crude traded at $52.39 a barrel on Monday, up 3.05 percent, while US crude was around $49.45 a barrel, rising 3.37 percent.

"In contrast, oil supply in 2017 was revised up by 0.36 million barrels per day to average 58.25 million barrels per day - representing year-on-year growth of 0.95 million barrels per day, following changes in all quarters, mostly in the U.S., based on USA actual production data from February and new forecasts for crude oil output".

The current OPEC, non-OPEC six-month production deal to take 1.8 million barrels a day off the market, is winding down, but looks sure to be re-ignited when OPEC ministers meet with their non-OPEC colleagues in Vienna next Thursday.

"Most of the countries support the proposition of Russia and Saudi Arabia to extend", Boutarfa said in Moscow after talks with Russian Energy Minister Alexander Novak, as quoted by Bloomberg.

Oil prices rose yesterday after U.S. government data showed a decline in domestic crude inventories and strong refining activity in the world's largest oil consumer, ahead of next week's meeting of major oil producers.

"People were impatient and thought we'd start drawing 10 million barrels a day since the first week of January", said Amrita Sen, chief oil analyst at Energy Aspects. "The emergence of United States shale as a key global player that can pump even during low oil prices means OPEC can no longer manipulate prices", Rachlin said, according to CNN.

Russia's largest oil producer Rosneft said on Thursday it was ready to stick to crude output agreements with Opec.

Preliminary data indicates that global oil supply decreased by 410 trillion bpd in April to average 95.81 mbpd, higher by 0.83 mbpd year on year.

Brent crude was up 33 cents at $51.98 per barrel.

At its meeting, OPEC is expected to renew its decision to reduce production by more than 1 million b/d through 2017.

Capital Economics said in a note this week, "that traders are reading too much into this situation" and fears they are being too optimistic.

If the victor is Ebrahim Raisi, a critic of Iran's nuclear deal with the West, the bank said new sanctions "would then very likely be imposed. which could reduce the oil supply from Iran even in the short term".

"The question is whether that 1.8 million barrel cut is enough to cut that overhang". It's true that oil taxes fund about half of the country's revenue, so there's a clear motive. That should help tighten the oil market and push up prices as demand rises gradually this year, he said.

Other reports by Click Lancashire

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