Saudi Arabia and Russia have said they are in favor of extending the cuts to the extraction of oil by world producers until the end of the first quarter of 2018 in order to reduce the oversupply in the market. Crude prices rebounded.
To achieve the objective of reducing inventories to the average of the last five years, it is necessary to extend the cuts to previously agreed volumes, said the energy ministers of the world’s largest oil producers at a joint press conference in Beijing. The two countries will present their position at the meeting between OPEC and other nations that are part of the agreement later this month in Vienna.
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Russia and Saudi Arabia, the largest of the 24 countries that agreed to cut production for six months starting in January, are reaffirming their commitment to the deal amid growing doubts about its effectiveness. Increased production in the United States has raised fears that the Organization of the Petroleum Exporting Countries and its partners are failing to reduce excess supply. Oil has lost most of its gains since its deal late last year.
“We must extend the agreement as we will not reach the desired inventory level by the end of June,” said Khalid Al-Falih during the event with Alexander Novak of Russia. “So we came to the conclusion that it would probably be best to finalize the deal by the end of the first quarter of 2018.”
Oil futures soared as ministers spoke. US West Texas Intermediate advanced 1.8 percent to $ 48.70 a barrel on the New York Mercantile Exchange, the biggest gain since May 2. Brent crude climbed 1.7 percent to $ 51.69 on the ICE Futures Europe exchange. Both are still 50 percent below the highs in 2014.
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As OPEC and its allies reduce supply, production In the United States, which is not part of the agreement, it has risen to the highest level since August 2015 as drills extract more shale from the fields. However, US shale inventories are showing signs of contraction, falling in the last five weeks from record levels at the end of March.
OPEC members agreed to cut back in November 1.2 million barrels a day in crude oil production, and several non-member countries, including Russia, agreed in December to contribute a reduction of 600,000 barrels a day.
“The consultations Preliminaries show that everyone is committed “to the production agreement and no country wants to leave, Novak said. “I see no reason for any country to quit.” The Energy Ministry has held preliminary talks with Russian companies on the matter, he said.