28 May, 2017
Crude oil prices surged over 3% to their highest level in two weeks after the world's two biggest producers agreed in principle to extend a deal on output restraint through March of next year.
Energy ministers from the two countries said on Monday that supply cuts should be extended for nine months, until March 2018.
Oil prices rose on Tuesday, extending gains after a joint announcement by top producers Saudi Arabia and Russian Federation to push for an extension of supply cuts until the end of March 2018.
Opec countries and countries outside the cartel participating in the deal on reducing oil production have reached a full consensus on extending the deal, Al-Falih said. The global benchmark crude traded at a premium of $2.72 to July WTI.
They recommended that the next round of reductions should be on the same terms as the first deal, when producer nations agreed to cut nearly 1.8m barrels a day for the first six months of 2017.
If producers maintain their cuts at the current pace, it could push the market into a small deficit by the fourth quarter, said Edward Bell, director of commodity research at Emirates NBD in Dubai.
Mohammed al-Rumhy, the oil minister of Oman, a key non-OPEC Arab producer, also added his support for the extension Monday.
So while Russian Federation and Saudi Arabia are doing all they can to induce a price rebound, they're also handing over valuable market share to their most dynamic competitors: American frackers.
Brent crude oil gained 30 cents to touch $52.12 a barrel, while the USA light crude traded 25 cents higher at $49.10 against their last close, reported Reuters.
USA energy firms added oil rigs for a 17th week in a row, extending a 12-month drilling recovery, energy services firm Baker Hughes Inc said on Friday.
The willingness to prolong the cuts, aimed at easing a global glut, is likely to sway other countries to do the same, according to Goldman Sachs Group.
"That said, we are skeptical about Russia's willingness to actively participate in any extended cuts". The American Petroleum Institute was scheduled to release data for last week at 4:30 p.m. EDT on Tuesday, with the U.S. Energy Information Administration report due at 10:30 a.m. EDT on Wednesday.
Supplies of gasoline probably dropped 1 million to 240 million barrels while inventories of distillate fuel, a category that includes diesel and heating oil, slipped 1.25 million to 147.5 million barrels last week. Other OPEC states are expected to support the move at a meeting on May 25.
