Agreement to Extend Oil Cuts Until March

16 May 2017, 07:02 | Andres Norman

People watch a South Korean TV news broacast showing file footage of a North Korean missile launch at a railway station in Seoul

People watch a South Korean TV news broacast showing file footage of a North Korean missile launch at a railway station in Seoul

Oil hit a three-week high after top exporters Saudi Arabia and Russian Federation said supply cuts needed to last into 2018, a step towards extending an OPEC-led deal to support prices for longer than originally agreed.

Khalid al-Falih, Saudi Arabia's energy minister, said in an interview in Beijing: "We have come to the conclusion the agreement needs to be extended".

Asian stocks are set to rise in opening trade on Tuesday following overnight gains on Wall Street, while oil is set to extend a week-long rally after major producers Saudi Arabia and Russian Federation said supply cuts needed to continue into 2018.

West Texas Intermediate climbed as much as 3.4 percent to $49.45 a barrel on the New York Mercantile Exchange, while global benchmark Brent increased as much as 3.3 percent to $52.52 on ICE Futures Europe. WTI Crude Oil took another leg up in the wake of the new week, reaching $48.67, the highest in two weeks.

"Each side is now adhering to the agreement, and I think that unless the goals are reached there is a big sense to continue this collaboration".

The increase, OPEC said, represents the biggest increase among countries within the oil producers' group.

The extension of the cut into the first quarter of 2018 will initially be on the same volume terms as before, although the ministers said they hoped other producers would join the efforts.

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OPEC began production cuts on January 1 in a bid to reduce swollen global inventories and bolster the price of oil, which is still stuck at half its 2014 level.

Opec members agreed in November to cut 1.2 million barrels per day (bpd) of oil production.

Production cuts agreed by OPEC and other major producers are set to expire at the end of June.

OPEC's report published Friday blames the US fracking, in particular for its losses.

"That said, we are skeptical about Russia's willingness to actively participate in any extended cuts".

A jump in USA exports to Asia, the world's biggest and fastest growing market and the last region in which OPEC supplies dominate, is a particular worry for the producer club.

But there's one thing standing in the way of higher prices: USA oil production. Waymo, the Alphabet driverless auto arm and Lyft the ride-hailing startup announced on Sunday the two would work together in developing technology for autonomous vehicles. OPEC ministers plan to meet on May 25 to decide whether to extend cuts in their production beyond June. At that rate, according to a report at Bloomberg, by the end of this year, lower crude production will remove about 120 million barrels from global stockpiles.



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