OPEC: Kuwait, Saudi Arabia Signal Likely Extension Of Supply Cuts

Posted April 25, 2017

Kuwaiti Minister of Oil Essam al-Marzooq said at the same event that he expected to see an extension of the agreement. "Compliance from Russian Federation is very good", Marzouq said.

In November 2016, OPEC agreed to cut oil production by 1.2 million barrels per day to 32.5 million barrels per day for the whole cartel starting January 2017.

Crude oil sold for over $100 a barrel in the summer of 2014, before bottoming out below $30 a barrel in January 2016.

Al-Falih did not identify or specify the number of countries in the initial deal for an extension.

"We find in fact that the USA inventory data since March has been surprisingly good: crude inventories have been tighter than seasonal through March and April, with main petroleum products drawing faster than seasonal since February", the analysts wrote.

The upcoming OPEC meeting may prove ineffective, says Valentin Zemlyansky, director for energy programs at the Center of World Economy and International Relations of the Ukraine National Academy of Sciences.

OPEC seems to be encouraged by the contribution of non-OPEC producers to the output cuts. "The situation has gradually been improving since the beginning of March", he noted further.

One African country has expressed interest in joining, he said, without elaborating.

That six-month deal is about to expire and investors are trying to parse whether it'll be extended amid perennial geopolitical tensions and overlapping strategic market interests.

However, Iraq may seek to be exempt and ask to boost its own output, the leader of the nation's Shi'ite ruling coalition Ammar al-Hakim told Reuters.

The only countries exempted from the production cuts are Nigeria and Libya.

"Given these sensitive circumstances, it is the right of Iraq to hope for an exemption by the other OPEC member states and have an opportunity to increase its production", Hakim, an influential cleric, said in an interview late on Wednesday.

"If they're (OPEC) so busy complying, how come we're taking so much extra inventory?"

Should oil prices keep falling, which looks increasingly likely, many of these companies could be pushed into bankruptcy, weighing not only on the share prices of larger energy companies but on bank stocks given concerns over loan losses.

Kuwait's energy minister said despite the U.S. output surge, the maths meant that inventories looked at globally would fall if their output deal holds - "I'm an engineer and I know one plus one equals two".

"Iran is not an issue". For this week, the gasoline stock-build has outweighed optimism over the output cuts guiding the market back into equilibrium, helped by a longer-term n bearish shadow being cast on the oil market by a potential surge in U.S. production.