O&G stocks buoyant after Saudi, Russia agree to extend output cuts

22 Mai, 2017, 05:38 | Author: Marc Bacque

The largest of the 24 producers that agreed to a deal to cut supply for six months starting in January are reaffirming their commitment to the agreement amid growing doubts over its effectiveness so far.

On Monday, Russian and Saudi energy ministers said in a joint statement that Moscow and Riyadh meant to propose a 9-month extension of the current Vienna agreement on oil output cuts on the existing conditions at the OPEC ministerial meeting in late May.

The minister also said that he hoped that 3 to 5 new countries will join the global pact.

Saudi Arabia and Russian Federation, leading a push by 24 nations to reduce the oil glut, proposed on Monday that producers should extend their supply curbs when they meet on May 25 in Vienna.

There's still concern that a surge in USA 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.

Russia's energy ministry said extending the cuts, which were came into force in November, through to 31 March 2018 would demonstrate "producers' determination to ensure stability, predictability and incremental development of the market".

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World oil prices leapt after the Saudi-Russian announcement and made further gains on Tuesday in Asian trade, with benchmark West Texas Intermediate up 19 cents at Dollars 49.04 per barrel.

U.S. oil output witnessed a steep growth in the last one year by almost 10% since mid-last year and touched 9.3 million bpd production.

"Extending the cuts until March 2018 would take account of the fact that demand in the first quarter of a year is lowest for seasonal reasons", said Commerxbank analyst Carsten Fritsch.

The IEA said OPEC's year-to-date compliance with the production cuts remained robust at 96% but stressed the "need to keep a close eye on Libya and Nigeria where there are signs that production might be rising sustainably".

"When the two biggest oil producers of the world reach a consensus on the extension of a supply cut, the market will listen", Tamas Varga, of oil broker PVM, said in a report. Opec will meet in Vienna on May 25.

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