Extending Alliance, Oil's Big Two Seek Smooth Exit From Cuts

Reuters

Reuters

Supportive to the market were comments from top exporter Saudi Arabia that the Organization of the Petroleum Exporting Countries and other producers would continue to cooperate on oil output cuts beyond 2018.

Russian Federation is prepared to prolong its alliance with the Organization of Petroleum Exporting Countries even after their accord expires at the end of 2018, Energy Minister Alexander Novak said in a Bloomberg television interview.

The call, the first explicit invitation by Riyadh for long-term cooperation between oil producers, came with oil prices topping US$70 a barrel thanks to the deal, after they dove below US$30 a barrel in early 2016. "The mechanism hasn't been determined yet, but there is a consensus to continue", Saudi Arabia's Energy Minister Khalid al-Falih said in Oman.

Higher oil prices could tempt members to cheat on their commitments, and the "explosive" growth of US shale also highlights the dangers of allowing oil prices to rise too high.

US crude futures recently traded up 13 cents, or 0.21%, to $63.50 a barrel on the New York Mercantile Exchange.

"That trade has been out of vogue a bit, but we're reaching a level now where that is going to start to kick in", said John Kilduff at Again Capital in NY.

Brent crude futures were at $66.50 a barrel, up 6 cents. For those in the market who assumed Russian Federation would jump ship long ago in search of higher revenue, the endurance of the alliance is no little surprise.

On threats of oversupply by United States shale oil production, Falih said there are multiple opinions about the growth of shale oil, some are very bullish and others are not.

Showers Possible on Saturday and Sunday
Initially, the air is cold enough for a period of freezing rain and snow in much of central and northern New England. For the vast majority of Northeast Kansas though, temperatures will be stuck in the 30s throughout the day today .

Two major pipeline outages, including the Keystone XL pipeline, and a string of devastating hurricanes in the latter half of 2017 helped to balance the domestic oil market.

Demand is expected to grow by 1.3 MMBPD in the year - a "conservative number".

OPEC's report follows a forecast from the US Energy Information Administration last that it expects US oil output to continue to rise in February with production from shale increasing by 111,000 b/d.

U.S. West Texas Intermediate (WTI) crude futures were at $55.32 a barrel, up 18 cents, or 0.3 percent, from their last settlement.

USA drillers cut five oil rigs in the week to January 19, bringing the count down to 747, energy services firm Baker Hughes said on Friday. This is because the IEA believes the recent price increase on crude could dampen oil demand growth to some extent, despite a healthy global economy.

OPEC and its allies see merit in maintaining their output limits into 2019, Oman Oil Minister Mohammed Al Rumhy told reporters before a meeting to assess compliance with the accord. Those events temporarily limited USA production and created a sharp drawdown in domestic supplies.

But both Mr Al Falih and Mr Al Mazroui said they did not think the rise in prices would hurt global demand for oil, according to Reuters.

Latest News