Oil flat, watching for United States inventory data, OPEC news

Ivan Schwartz
May 19, 2017

While Kuwait supported the announcement, other Organization of the Petroleum Exporting Countries (OPEC) members and key oil producers are set to meet on 25 May in Vienna to decide the future course.

The Saudi-Russia announcement on Monday will probably extend a price rebound that began last week, though the rally is "modest" compared to the increase when OPEC cuts were first agreed to late a year ago, Goldman Sachs analysts said in a report.

US West Texas Intermediate crude was US$48.85 per barrel, up 2.1 per cent.

Saudi Arabia and Russian Federation have agreed to extend crude oil output cuts until March 2018 in their latest effort to rebalance the global crude market, energy ministers for the two major oil producers said on Monday.

Brent crude futures, the global benchmark for oil prices, were at $50.86 per barrel at 0125 GMT (9:25 p.m. ET on Sunday), little changed from their last close at $50.84.

Crude oil prices surged almost 2.5% to their highest level in two weeks after the world's two biggest producers agreed in principle to extend a deal on output restraint through March of next year.

"These combined volumes could largely offset the benefit of the extended cuts", Goldman Sachs said, keeping its average Brent price forecast for the third quarter of 2017 at $57 per barrel.

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"The news that OPEC has tentatively agreed to rollover the production cut agreement should provide some support to oil prices this week", ANZ bank said on Monday. US crude stockpiles probably fell by 2.75 million barrels last week, according to a Bloomberg survey before a government report Wednesday. Their announcement sparked a rally in oil prices, which had sagged on signs the cutbacks made so far haven't significantly depleted the world's brimming fuel inventories.

Current U.S. production is at 9.3 million bpd, up more than 10 percent since its mid-2016 trough.

There's still concern that a surge in United States production, together with an increase in Libyan output and signs of recovery in Nigeria, may undercut the Organization of Petroleum Exporting Countries' strategy to stabilize the market and prop up prices.

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 US, yet kept the full-year growth forecast steady.

Yet, OPEC's own production rose in April, by 65,000 barrels daily last month, to 31.78 million bpd, with increased production in Nigeria and Saudi Arabia compensated for production outages in Libya and lower production rates in Iran, both exempt from the cut agreement.

The overall outlook for the non-OPEC countries, eleven of which were voluntarily cutting production to support OPEC, pointed to faster growth than previously anticipated in 2017, the IEA said.

Other reports by GizPress

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