Saudi says all 'on board' to extend oil cuts for nine months

Saudi says all 'on board' to extend oil cuts for nine months

"We believe that the continuation with the same level of cuts plus potentially adding one or two small producers who wish to join will be more than adequate to bring the five-year balances to where they need to be by the end of the first quarter of 2018", Khalid Al Falih, the Saudi oil minister, said in Riyadhn yesterday.

OPEC is considering extending and deepening ongoing output cuts at next week's scheduled meeting, sources have claimed.

The extension and possible deepening of OPEC production cuts might not produce a massive oil rally, as the market will be levelled off by the U.S. exports, but stronger global demand will contribute to easing the oil supply glut, with oil prices stabilizing at 5-10 percent higher than their present level.

Oil prices have gained support from reduced output but high inventories and rising supply from producers not participating in the accord - particularly U.S - have limited the rally, pressing the case for extending the curbs. OPEC and other global producers such as Russian Federation had agreed to reduce production in the first six months of this year, and the decision to extend the cuts will be taken when they meet in Vienna at the end of the month, al-Falih said.

On Friday, Brent crude LCOc1 closed up $1.10, or 2.1 percent, at $53.61, the highest settlement for the worldwide benchmark since April 18.

"OPEC and non-OPEC countries are working together, and that should encourage investment".

Producers are working on fixing some "deviations" to the output limits set when they agreed on the cuts a year ago, al-Falih said.

Even Iran is likely to go along with such the extension plan if there is a consensus, sources familiar with Iranian thinking have told Reuters.

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Iraq has been among the least compliant OPEC members in meeting its production quota under the deal, according to estimates provided by OPEC's six secondary sources used to monitor output. While OPEC oil cuts have resulted in a decrease in the global market share occupied by members of the energy cartel (most notably Saudi Arabia), US oil started to fill this niche.

"OPEC ministers likely will continue to talk oil higher, there is more chatter on the discussion and that means there will be more volatility in prices", said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.

Neither Saudi nor most of other Opec members can afford this scenario right now, BofAML said in the report. Crude stocks stood at a record 1.235 billion barrels. "My objective is clarity of where the market is going so that people invest, and I am less concerned about prices over the next 12 months than I am over the next 3 years, when supply will be short, demand will be approaching 100 million barrels a day", he said.

That compares with a supply reduction of 1.2 MMbpd from October levels implemented by OPEC, plus a cut of less than 400,000 bpd from non-members.

The panel, the Economic Commission Board (ECB), does not set policy and its meeting precedes the gathering of OPEC and non-OPEC oil ministers on May 25 to decide whether to extend the supply pact.

But surging United States production, which next year is expected to reach the highest level since 1970, is rattling Opec, which meets on May 25 in Vienna to agree on policy.

OPEC and its key non-OPEC partners in a production cut deal appear to have aligned their messaging, with a nine-month extension to the agreement seemingly in the works when they meet in Vienna on Thursday.

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