Oil rises on prospect that output cut could extend beyond 2017

Oil rises on prospect that output cut could extend beyond 2017

Oil has surrendered most of its gains since their deal late previous year.

Saudi Arabia and Russian Federation signalled they could extend production cuts into 2018, doubling down on an effort to eliminate a supply surplus just as its impact on prices wanes.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017 for six months, extendable for another six months.

Despite this, Al-Falih said that markets had improved from last year's lows, when crude prices fell below $30 per barrel.

Light sweet crude oil (WTI) futures went up 0.70 dollar or 1.54 percent to close at USD 46.22 a barrel at the New York-based commodity exchange NYMEX.

"The market is in a very risky condition", said Robin Bieber, technical chart analyst at London brokerage PVM Oil Associates. The leading business daily reported that the OPEC was likely to extend cuts when it meets on May 25 but said a deeper cut was unlikely.

Oil prices rose on Monday as Saudi Arabia's energy minister said an OPEC-led production cut scheduled to end in June would likely be extended to cover all of the year, or even into 2018, although another increase in US drilling capped gains.

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Meanwhile Russia has said it supported extending the deal. US drillers added six oil rigs by the end of last week, oilfield services firm Baker Hughes said on Friday, taking the total to 703 and marking the 16th straight week of gains.

Since a low point in May 2016, US producers have added 387 oil rigs, or about 123 per cent, Goldman Sachs said.

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

US oil production has risen more than 10 per cent since mid-2016 to 9.3 million bpd, close to levels of top producers Russian Federation and Saudi Arabia.

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

He said oil prices would probably rally "but the recovery won't be a straight line".

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