Oil Gains After Saudi Arabia Backs Deal to Extend Global Supply Cuts

Robyn Valdez
April 22, 2017

The Energy Information Administration (EIA) said that next year, United States crude oil output would grow to 9.9 million barrels per day (bpd) from the current 9.22 million bpd.

The world produced a total of 95.82 million barrels per day (mb/d) last month, a fall of 230,000 barrels from February, the Organisation of the Petroleum Exporting Countries said in its monthly report.

Crude oil for May delivery CLK7, -0.08% traded 1 cent higher at $53.12 a barrel, after having traded as low as $52.82 earlier in the day.

OPEC data showed members of the group had cut March output beyond the level they had promised.

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Opec and other producers, including Russian Federation, have pledged to cut output by around 1.8 million barrels per day (bpd) during the first half of 2017 in an effort to rein in oversupply and prop up prices.

The market has been oversupplied for three years and members of the Organization of the Petroleum Exporting Countries as well as some non-OPEC producers have agreed to slash output to rein in the glut. Saudi Arabia, the group's de facto leader, provided numbers directly to OPEC, saying it cut output by 111,0000 barrels a day last month to 9.9 million bpd.

Russian Federation is the largest non-member contributor to an arrangement by the Organization of Petroleum Exporting Countries (OPEC) to balance the global market for oil through production cuts. Iraq, the second largest producer after Saudi Arabia, reduced production by only 159,000 barrels - to 4.402 mln barrels (quota 210,000 barrels).

Yes, the price rise is being helped by seasonal demand - crude oil prices traditionally rise at this time of year as refineries return to work and begin producing gasoline supplies for the summer driving season - but global oil inventories are being drawn down.

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A recent report from oil consultant Wood Mackenzie offered more good news for the offshore business.

Analysts said, however, that there are worries demand growth could falter, and other indicators were warning that the market had not yet cleared enough of its surplus to keep prices rising.

"Extending production cuts beyond June is gathering momentum", said Jonathan Barratt, chief investment officer at Ayers Alliance Securities in Sydney.

Market watchers have long maintained that producers need to extend their production cut if they hope to make a dent in the global inventories.

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