According to the July plans, Saudi Aramco will cut supplies to South Korea by nearly 5 per cent, India by around 20 per cent and China by some 10 per cent, while supplying full volumes to buyers in Japan and Taiwan, said one source who had knowledge of the nominations but did not wish to be identified. US petroleum production fell by 300,000 barrels per day in 2016, as a result of relatively low oil prices.
State oil company Saudi Aramco will also supply full volumes of heavy crude for a third straight month, despite cutting supplies for this grade earlier this year, one of the sources said.
He also doesn't expect prices to break out of their current range, with production cuts spearheaded by the Organization of the Petroleum Exporting Countries seen being offset by still-increasing output from the U.S.
Brent crude futures LCOc1 had risen 23 cents to $48.38 per barrel by 0900 GMT, while U.S. West Texas Intermediate (WTI) crude futures CLc1 gained 17 cents to $46.00 per barrel. This industry has benefited from a long period of oil price stability and low volatility between 2011 and 2014, not only to expand but also to generate strong productivity gains that have allowed U.S. producers to reduce considerably their costs of production.
Remarks from Russia's Alexander Novak and Saudi Arabia's Khalid al-Falih at the Astana Expo 2017 in Kazakhstan this weekend suggest as much.
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"The fact that USA oil production has risen almost [600,000 barrels a day] so far in 2017 remains a substantial underlying headwind on prices, as the output gains are offsetting roughly half of OPEC's pledged cuts" of 1.2 million barrels, said Tyler Richey, co-editor for the Sevens Report, according to a report on marketwatch.com last Friday.
The Organization of Petroleum Exporting Countries and other crude producers including Russian Federation agreed on May 25 to extend the deal, which they reached past year, until the end of the first quarter. Both price markers have just posted 2 consecutive weeks of losses and were down by around 12 percent year-to-date. Al-Falih added that he is "convinced that the overall trend for the market is that of rebalancing".
Optimism dominated during the session with WTI moving above $46.50 p/b ahead of the U.S. open with Brent trading just above the $49.0 p/b level.
The agreement, however, failed to lift oil prices. OECD commercial crude and petroleum products stocks declined for the second consecutive month in March, by 32.9 million barrels to 3.03 billion barrels, the International Energy Agency (IEA) estimated in its May report.
This exceeds the level reached when global oversupply peaked two years ago, and Reuters says more export plans are a week away, "likely bringing more than 50 million extra barrels". Any additional rise in oil prices will bring back additional USA competition to the game and Opec members and their allies will have no choice but to reduce their market share or to observe a new price drop.
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