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gamesindustryblog.com May 26, 2017


Oil rises on prospect that output cut could extend beyond 2017

08 May 2017, 04:04 | Clarence Schmidt

Brent weekly chart

Brent weekly chart

Brent crude was up 40 cents at $49.50 a barrel by 0930 GMT.

Saudi Arabia's energy minister Khalid Al-Falih said today that oil markets were rebalancing after years of oversupply, but that he still expected an OPEC-led deal to cut output during the first half of the year to be extended to the end of 2017.

He said refinery maintenance in the U.S., growth in non OPEC supply especially in the United States and actions of financial players in the market have slowed the impact of the recent production cuts that were exercised by 24 countries that joined together on Dec 10 previous year.

U.S. West Texas Intermediate (WTI) crude futures were at $46.85 per barrel, up 63 cents, or 1.36 percent.

In that week, the price of Brent crude fell by 2 percent to around $50 a barrel, as doubts among investors grew that the cut of 1.2 million barrels per day of oil by the Organization of the Petroleum Exporting Countries would help the market rebalance quickly enough. "The trend is still down, but just correcting".

OPEC's subsequent agreement with non-OPEC producers made this explicit by stating output would be cut from January 1 for six months with the option to extend the curbs for a further six months.

Saudi Arabia expects to extend until the end of 2017 the OPEC-led deal struck at the beginning of the year which cut oil output.

Dozens of Palestinians injured in West Bank clashes
However, the wording suggests Hamas considers this to be an interim step, not a way of ending the conflict. He said the new document was "a tool for the future but it does not mean we're changing our principles".

Countering those efforts, USA drillers added oil rigs for a 16th week in a row last week, extending a drilling recovery into a 12th month, energy services firm Baker Hughes Inc said on Friday.

Since a low point on May 27, 2016, USA producers have added 387 oil rigs, or about 123 percent, Goldman Sachs said.

On the demand side, China's crude oil imports in April eased by nearly 9% from March to 8.37 million bpd, although this was largely due to refinery maintenance.

As OPEC and its allies curbed supply, production in the US, which is not part of the agreement, has risen to the highest level since August 2015 as drillers pump more from shale fields.

"It's all about inventories and USA shale versus OPEC", Sayed said.

Hussein Sayed of brokerage FXTM said oil prices would probably rally, "but the recovery won't be a straight line". OPEC members, including Saudi Arabia support the extension of Vienna deal.



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