Oil prices rise as market expects extended production cut

Oil prices rise as market expects extended production cut”

Asset management firm AB Bernstein said in a May 16 report that OPEC cuts would "lead to accelerated inventory drawdowns in the second half of 2017, but the return to normalized inventories will. drag into 2018".

Venezuela, Russia, Saudi Arabia and Algeria - also members of the committee - have said they favor an extension through March 2018.

Both benchmarks have gained more than 10 percent from their May lows below $50 a barrel, rebounding on a consensus that the Organization of the Petroleum Exporting Countries and other producers will maintain strict limits on oil production in an attempt to drain a global oversupply.

Oil's earlier price decline, which started in 2014, forced Russian Federation and Saudi Arabia to tighten their belts and led to unrest in some producing countries including Venezuela and Nigeria.

Late previous year 24 countries, including those in the Organization of the Petroleum Exporting Countries, agreed to cut production by 1.2 million barrels per day.

Russian Energy Minister Novak stated that the base proposal is for an extension for 9 months and the Venezuelan minister stated that they would support a 9-month extension at current levels.

By 1230 GMT on Wednesday, Brent crude was down around 0.2 percent at $54.03 a barrel. In an exclusive interview with Kuwait's news agency, the Kuwaiti oil minister Essam al-Marzouq kept all options on the table including deeper cuts: "All options are on the table and could be discussed".

OPEC has struggled to reduce global oil inventories to their five-year average, partly because of rising production in the United States, which is not a part of the existing deal, as well as stockpiles hovering near record highs.

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Earlier in the day, the third meeting of the JMMC was held in Vienna.

One of the main reasons why markets have not tightened more has been US oil production, which has soared more than 10 percent since mid-2016 to 9.3 million bpd.

Early in the session oil prices fell following news of a White House plan to sell half the 688 million-barrel US oil stockpile from 2018 to 2027.

A release of half over 10 years averages about 95,000 barrels per day (bpd), or 1 percent of current USA output.

U.S. oil production has jumped by nearly 50 per cent over the past five years, helping to keep prices lower.

US President Donald Trump on Monday proposed selling off half of the nation's Strategic Petroleum Reserve, or SPR, as part of proposed changes to the federal government's role in energy markets. Norway's Oil Ministry said later on Tuesday it had no plan to join cuts but had had a good dialog with OPEC.

Looking at the progress of the initial output-cutting deal reached in December past year, Boutarfa said the market could not see the impact through lower inventories due to sizeable exports from the Middle East to the United States.

Saudi Arabia has undertaken the largest cut in oil output (486,000 barrels per day) among the participants of the OPEC deal signed past year in Vienna.

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