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Saudi Arabia signals oil cuts could extend beyond 2017

Oil prices rise on expectation of output cut extension Oil rises as OPEC cuts outweigh US drilling boom
Manuel Armenta | 19 May, 2017, 23:55

The producer group and other major suppliers including Russian Federation agreed past year to cut their collective production by about 1.8 million barrels a day for the first half of 2017 in an effort to reduce bloated global stockpiles and re-balance the market.

United States crude oil production seems to be derailing the efforts made by the Opec countries as it has risen to 9.293 million barrels per day (mbd) in April 2017, the highest level since August 2015 and up 10 per cent (0.865 mbd) from July 2016's low of 8.428 mbd.

Kuala Lumpur: Saudi Arabia's oil minister said on Monday that oil producers would "do whatever it takes" to rebalance the market and that he expected a global deal on cutting crude output to be extended to the end of 2017 or possibly longer.

West Texas Intermediate, the USA benchmark for the price of oil, was down 0.28 percent to $46.30 per barrel.

The bullish inventories report, came a day after crude prices dropped 1%, after EIA raised its near-term outlook for USA oil production and revised down its projections for oil prices.

The US Energy Information Administration stated that crude production is expected to rise by 9.31 million barrels per day in the US, a 440,000bpd increase from the previous expectation. Higher output in non-Opec countries, particularly the United States, Canada and Brazil, has offset Opec's deal reached past year to cut production and kept pressure on oil prices.

Brent crude was up just 3 cent at $49.13 a barrel by 0959 GMT, after trading as high as $49.92 earlier in the session.

OPEC meets on May 25 and the group's ministers have been talking up the chances of more production cuts.

Oil major Saudi Aramco has told Asian refiners it will reduce supplies by about seven million barrels in June. Russian Federation and 10 other non-OPEC producers agreed to cut half as much.

Calling on U.S. to join in the rebalancing of global oil market, OPEC said "a large part of the excess supply overhang contained in floating storage has been reduced and the improvement in the world economy should help support oil demand".

The figures showed the biggest one-week drop in oil stockpiles this year.

"As long as you've got those builds in gasoline, it is going to be hard for crude oil to rally", said Olivier Jakob, energy market strategist at Petromatrix in Zug, Switzerland.

Libya and Nigeria are two OPEC members exempt from the production declines so they can lean on oil revenue to help ensure national security.