Oil Producers Meet on Output Cuts, Possible Rollover

Oil Producers Meet on Output Cuts, Possible Rollover
Oil Producers Meet on Output Cuts, Possible Rollover
Author

31 March, 2017

Iranian Oil Minister Bijan Zanganeh said on Tuesday that the agreement between the Organization of the Petroleum Exporting Countries and other producers led by Russian Federation to cut output by 1.8 million bpd in the first half of 2017 was likely to be extended.

JMMC had requested the JTC with the OPEC Secretariat to review the oil market conditions and revert to the JMMC in April 2017 regarding the extension of the voluntary production adjustments as stipulated in the Declaration of Cooperation, in order to ensure market stability.

Just last week, Vagit Alekperov, the president of Russia's largest energy company Lukoil, called on OPEC and non-OPEC countries to extend their oil production cuts to help prop prices.

The committee said it "encouraged all participating countries to press on toward 100 percent conformity".

Prices for front-month Brent crude futures, the Global benchmark for oil, had gained 20 cents from their last close to $50.95 per barrel by 0320 GMT.

Soaring output and brimming inventories have made U.S. WTI crude much cheaper than its global peer, Brent, which is receiving support above $50 per barrel by the OPEC-led production cut. They are now around $48.

But crude was weighed down by a resurgence in US shale oil production and the expectation that inventories in the country would once again build, illustrating the persistent global supply overhang that has depressed prices for three years.

Non-Opec member Azerbaijan also said it was ready to join an extension of the deal into the second half of this year.

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Nezar al-Adsani, the CEO of the Kuwait Petroleum Corp., said the decline in crude oil prices was creating risks for investments, which the official Kuwaiti news agency, KUNA, said "could create unstable conditions in worldwide markets".

In any case the lack of an immediate extension to the output cut has weighed on oil prices as a new week gets under way in Asia.

The committee, formed by OPEC and non-OPEC members to oversee compliance with the deal to reduce output reached a year ago, also studied the possibility of extending the cuts for another six-month period.

"The market is exhausted of their verbal interventions", John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone.

Looking ahead, the energy market will get its weekly update on US petroleum supplies early Wednesday from the Energy Information Administration, after the American Petroleum Institute figures late Tuesday. Opec's 11 members with supply targets cut output to 29.68 million bpd in February, 123,000 bpd more than required by target.

Energy ministers from OPEC and other oil-producing countries pose for a group photo prior to the opening session of the15th International Energy Forum Ministerial meeting in Algiers, Algeria, Tuesday, Sept. 27, 2016.

US drillers added oil rigs for a 10th week in a row, data from energy services firm Baker Hughes showed on Friday, as energy companies boost spending on new production.

In exchange-traded funds, the United States Oil Fund LP (USO) was trading up 1.1%. We can see in the chart below that South Korea continues to pull in more and more light crude.


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