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Oil Futures Bullish On Continued Production Cuts

19 Mai 2017

Yet, OPEC's own production rose in April, by 65,000 barrels daily last month, to 31.78 million bpd, with increased production in Nigeria and Saudi Arabia compensated for production outages in Libya and lower production rates in Iran, both exempt from the cut agreement.

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.

The statement comes ahead of Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna on May 25 when leaders of the member nations would consider extending output cuts agreed with 11 non-members including Russian Federation in December a year ago, Reuters added.

Analysts are expecting Opec to extend the agreement for another six months when the cartel meets later this month, and there appears to be a consensus emerging among nations involved in the original pact to extend the agreement beyond June, according to Saudi Arabia's Opec governor, Adeeb Al-Aama.

The supply cut has helped prices recover from a low of $26 a barrel early a year ago.

"We've come to the conclusion that the agreement needs to be extended".

OPEC began production cuts on January 1 in a bid to reduce swollen global inventories and bolster the price of oil, which is still stuck at half its 2014 level.

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The ministers said that while they start from the assumption of rolling over the current deal, they also hoped that "a wider circle of countries outside the current group will see the benefit of this cooperation in bringing stability to oil markets, and will join the effort". Brent crude futures were at $52.05 per barrel at 0129 GMT, up 23 cents, or 0.44 percent, from their last close.

The contracts closed 98 cents and $1.01 higher Monday, buoyed by Saudi Arabia and Russian Federation saying they were willing to do "whatever it takes" to bring global oil inventories back to their fiveyear range.

A report published Tuesday by the International Energy Agency found the global market for oil was "almost balanced".

USA drilling activity last week rose to its highest in two years, while US production has jumped more than 10 percent since its mid-2016 trough. "These combined volumes could largely offset the benefit of the extended cuts", Goldman Sachs said, keeping its average Brent price forecast for the third quarter at $57 per barrel. "Get prepared for real sacrifices or we will have to say goodbye to the deal", he said.

However, last year Saudi officials agreed to the first cut in production for eight years.

"However, we'll see whether the rebound remains until the United States market opens".