Saudi oil minister says production cuts may need to continue

West Texas Intermediate crude oil was rising 0.7% early Thursday to $51.21 a barrel, while Brent crude, the global benchmark, was up 0.8% to $53.37 a barrel.

Concerns that USA output was offsetting cuts from OPEC and other major producers like Russian Federation, which had caused the drop, were allayed on Thursday, however, by Saudi Arabia and Kuwait, who gave a clear signal that OPEC planned to extend into the second half of the year a deal with non-member producers to curb supplies of crude. June WTI, the new front-month, was changing hands around $50.74, 3 cents higher than its previous day's close.

The accord last year between OPEC, Russia and 10 other producers was meant to boost prices by eliminating an inventory surplus of about 300 million barrels over the five-year average - equivalent to three days of global oil production. Though many ministers have indicated their support for an extension of the production cuts, Falih said that OPEC was "still communicating with many countries". Joint talks with non-OPEC oil ministers will also take place that day, two sources said.

If stocks remained too high, "we will extend this agreement to nine or even 12 months (from January 1) because our target is the level of (inventories), and this will be the indicator of the success of our initiative", he added.

Speaking at a conference in the Middle East on Thursday, Al-Falih said: "The consensus is building [on extending output cuts] but it's not done yet".

The bank is forecasting a Brent price of US$59 a barrel for the second quarter of this year.




Investors are also monitoring whether the Organization of the Petroleum Exporting Countries will extend ongoing production cuts into the second-half of 2017, a move which could offset rising USA output.

"Prices in the $40s are not as much an issue for US producers that have hedged", he said.

The post Oil producers "might have to" extend output cuts appeared first on Vanguard News. He has a deep understanding of market fundamentals and the impact of global events on capital markets. US inventories of 532 million barrels remained near all-time records reached in March.

Some market commentators see little need for Opec to extend the cuts.

Marzouq said there was a "noticeable increase in compliance from non-OPEC".

"The [lack of] reaction can either be attributed to saturation, as such news is released on nearly a daily basis, or to the fact that the foremost goal of the OPEC agreement - namely to reduce the huge stocks of crude oil and oil products - is still a long way from being achieved, " Commerzbank said in a note.

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