Crude below $50 as OPEC disappoints with 'safe bet' extension

06 Juin, 2017, 10:12 | Author: Marc Bacque
  • AUSTRIA-OPEC-OIL-MARKET-COMODITIES

Yesterday, brent crude oil fell more than 1pc to around $53 per barrel as markets were disappointed Opec would not deepen the cuts or extend them by as long as 12 months.

"It seems highly likely, although we can never be certain until the decision is made, that we're going to roll over with the same terms over a nine-month period", said Khalid al-Falih, the Saudi energy minister, at a meeting of Opec and 11 non-member countries on Thursday. With prices likely to fall because of an oversupply in the market if they don't, both Russian Federation, and OPEC oil giant Saudi Arabia have spoken out in favor of an extension ahead of Thursday's meeting.

"Russia has an upcoming election and Saudis have the Aramco share listing next year so they will indeed do whatever it takes to support oil prices", Gary Ross, head of oil company PIRA Energy, told reporters about the underlying reasons for OPEC's move. West Texas Intermediate crude oil, the United States benchmark of prices, rallied about 17% from its year-to-date trough at the beginning of May through Wednesday.

OPEC and other oil-producing nations have extended their output cuts for an additional nine months in an effort to shore up prices.

Among the scenarios being considered by the panel are a six or nine-month extension with a possible deeper cut, reports said.

Production curbs have helped prices soar above $50 a barrel this year.

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"Having analyzed the results of the Vienna agreement, it was noted [at today's meeting] that the agreement had a positive impact on the market by stabilizing the oil prices at a range from $50 to $55 per barrel", he said. Global crude oil inventories are above their five-year average or above 3 billion barrels.

Hopes are running high ahead of Thursday's OPEC meeting that members will agree to further cuts to output in a bid to maintain price stability.

That doesn't mean, though, that the countries won't extend the cuts in March 2018 but it will be decided "closer to the date", the minister explained.

"We support the extension of production cuts agreement that was agreed upon past year for another six months", Mohammed Al Rumhy, Minister of Oil and Gas said.

The OPEC cuts have enabled USA drillers to export more, especially to Asia. OPEC hadn't yet announced the production levels for the agreement on Thursday.

Opec's current deal, agreed at the end of 2016, covers only the first half of 2017.

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