Crude Jumps On Likely Extension of OPEC Cuts

Crude Jumps On Likely Extension of OPEC Cuts

Crude Jumps On Likely Extension of OPEC Cuts

Oil prices were marginally firmer on Friday, as the market waited to see whether major producers meeting in Vienna would back an extension to output cuts beyond March 2018.

Last May, Opec and non-Opec members agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.8 million bpd agreed in November previous year.

Nigeria had argued that although its production recovery efforts had made some appreciable progress since October past year, it was not yet out of the woods. Nine months into their agreement, implementation of the pledged 1.8 million barrels a day of production cuts remains high.

The oil market has been awash in crude for more than three years, and OPEC has struggled to accelerate the rebalancing effort, but the world could be heading for a supply crunch in a few years due to the sharp fall in industry spending, according to USA Today.

Brent crude futures were up 28 cents at $56.71 a barrel at 1351 GMT, their highest since March.

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Fishing for reasons behind the change in sentiment, John Kilduff founding partner at Again Capital, suggested that crude has risen high enough to tempt countries to boost production above agreed levels, and that "compliance looks to be a bit of an issue" if prices rise much further than where they are now. The International Energy Agency has encouraged OPEC and its partners to extend the cuts or the market will once more return to an oversupply condition.

He stated that Nigeria will be prepared to cap its crude production when it has stabilized at 1.8 million barrels per day.

Hong Kong - Oil is heading for a third weekly gain before an OPEC-led committee meets in Vienna to discuss ongoing production curbs. Despite the current output restraints increasing USA oil production has curbed price gains.

Oil inventories in developed economies have dropped by 170 million barrels since January and backwardation in prices shows stockpiles are shrinking and demand rising, Kuwait's Almarzooq said.

The Venezuelan minister of Oil, Eulogio del Pino, highlighted the importance of cooperation between producer countries and valued as necessary to eliminate the control of the oil market by speculators. "The reality is the cap we agreed on is 1.8 million bpd and as long as we are producing below that, we are already in it". This has prompted more talk about including Libya and Nigeria in the pact. But two Opec sources said the ministers were not likely to make a specific recommendation for an extension.

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