Oil Back On The Rise, As OPEC Deal Extension Seems Likely

  • Oil Back On The Rise, As OPEC Deal Extension Seems Likely

Oil Back On The Rise, As OPEC Deal Extension Seems Likely

"Demand for this [U.S. offshore] crude is higher in Asia, pushing Dubai prices above WTI, due to perception that OPEC members are reducing supply of heavier crude because they prefer to sell more expensive light crude to meet their quota", he said in response to emailed questions. On Wednesday, oil prices were boosted by the EIA reporting a fresh draw in crude oil inventories for the week to May 12, at 1.8 million barrels.

A monthly report from the International Energy Agency released Tuesday pegged OPEC's member compliance with the cuts at 96%-a historically high compliance rate for a group whose members had previously been known to cheat on production limits. "The extension alone should result in deeper cuts", he said, stressing that U.S. production would stop the rebalancing of the market this year. USA energy companies added oil rigs for a 18th consecutive week this week, Baker Hughes showed. "So I think the people out here are excited about what the future holds, which might not have been what you would've said a few years back, so that's definitely the positive". There is no doubt that the reason behind the jump in the price of oil is a series of positive developments.

"We've come to conclusion that the agreement needs to be extended", they said in a statement, adding that they would do "whatever it takes to achieve the desired goal of stabilising the market".

Members of the cartel along with Russian Federation and other producers are due to meet on May 25 to prolong the pact. The best case scenario for the oil market seems to be a flat outlook for the sector. Analysts estimate that every dollar increase in the oil price between $45 and $55 a barrel results in an additional 1.2 billion barrels that become economical to produce.

The significant increase in United States production and supplies to northern Asia has largely offset OPEC-led deal to rebalance the market.

RBC Capital Markets' Michael Tran has more good news: the US product glut could be relieved by rising exports.

More possible good news for the oil industry.

Rewinding to 2016, the oil market hit an inflection point in the summer as declining non-OPEC output and strong demand signalled a nascent market rebalancing.

"This should see oil prices remain well bid, as OPEC continues to talk up a continuation of the production cut agreement", it said.

The meeting precedes a policy-setting gathering of OPEC and non-OPEC oil ministers on May 25 to decide whether to extend beyond June 30 their deal to reduce output.