OPEC likely to extend production cuts into next year

  • OPEC likely to extend production cuts into next year

OPEC likely to extend production cuts into next year

Khalid Al-Falih said at the time he was "confident" that OPEC members could reach an agreement that would extend their 1.2 million barrels per day in output reductions "into the second half of the year".

The market may be disappointed if Thursday's meeting ends with "just" a nine-month extensionAmrita Sen, chief oil market analyst, Energy Aspects Ltd.

Oil producers within and outside OPEC headed today towards an agreement maintaining cuts in output into next year after a joint committee recommended a nine-month extension.

Amrita Sen, chief oil market analyst at Energy Aspects Ltd., also warned that further market disappointments may be forthcoming: "A nine-month extension is effectively a done deal, but because Russian Federation and Saudi Arabia announced their support for it earlier in the month, the market may be disappointed if Thursday's meeting ends with "just" a nine-month extension, and prices may sell off".

The production cut, introduced in January, was initially only to cover the first half of 2017, but an ongoing glut has put pressure on OPEC and its allies to extend the cut at a meeting in Vienna on Thursday.

Secretary General of OPEC, Dr. Mohammad Barkindo, had stated that the extensive consultations that began in August 2016 were undertaken with commitment, great diligence and rare courage that facilitated flexibility, accommodation and compromise among the respective parties.

"I think we nearly all agree on nine months", Algeria's Energy Minister Noureddine Boutarfa told Bloomberg before the committee meeting.

The preemptive announcement of a 9-month extension has been an unexpected development.

The committee will hold its next meeting in Russian Federation, the largest non-Opec party to the deal, in July, assuming ministers agree a rollover of the deal in Vienna this week.

Blanch said the supply cut agreement is a result of a price war OPEC started in 2014 with US shale producers and Canadian tar sand players.

Laredo has hedged some 70 percent of its future oil production for 2017 so that when oil prices dropped below $50 a barrel earlier this year, it was able to receive $56 a barrel, well above its breakeven point.

Oil prices rose on Wednesday, supported by growing confidence that OPEC and other big producers would agree to keep output restricted for the rest of 2017 and into the first quarter of next year.Benchmark Brent crude oil was up 25 cents a barrel at $54.40 by 0940 GMT.

One manifestation of the abundant supply is the fact that stocks of crude oil held by refineries and governments are well above normal levels; a new historical high in the rich countries in March, according to the IEA.

Financial information firm IHS Markit sees OPEC revenues showing a modest gain this year after dropping from their peak of $1.2 trillion in 2012.

He said also that the current oil prices are acceptable for Azerbaijan. United States inventories fell by 1.5 million barrels last week, the American Petroleum Institute was said to report.

Issam Almarzooq, the Kuwaiti oil minister, warned Tuesday that not all of the oil-producing countries have agreed it's necessary to extend the cuts by nine months, according to media reports.

OPEC members, in an attempt to bring prices back up, agreed last November to curtailments in production.

In 2015, the traditional oil exporters gained little because USA shale oil companies had hedged against the price risk.

While some US producers went bankrupt during the industry's downturn in the past three years, others have been remarkably resilient, cutting costs and finding cheaper ways to do business.

Higher crude prices would fatten profits for oil companies and energy services firms that make up the core of Houston's economy.

The release of the Trump Administration's 2018 fiscal year budget included a sale of about half of the U.S. Strategic Petroleum Reserve (SPR).

It is unclear if Congress will approve the initiative. I should say that besides him I talked to ministers of Kuwait, Egypt and they are all quite optimistic.