Saudis see all 'on board' to extend oil cuts

All producers agree to extend crude-oil output cuts by nine months to help trim a supply glut, according to Saudi Arabia's energy minister.

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.

With potential for "two or three more producers" to join, Falih was optimistic global supply and demand would balance by the first quarter of next year.

Inventories in 35 of the world's most industrialized nations - the Organization for Economic Cooperation and Development - were just above 3 billion barrels in April, or about 307 million above their five-year average, data from the U.S. Energy Information Administration shows.

Meanwhile, BMI Research said that "despite reducing production in early 2017 in line with the OPEC agreement, Russian Federation will be able to manage its output so that both exports and production will be higher year-on-year in (overall) 2017".

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There is also talk that OPEC is looking at the option of deepening current production cuts, but it is not clear whether there would be support for that.

The Organization of the Petroleum Exporting Countries, Russia and other producers originally agreed to cut production by 1.8 million barrels per day (bpd) for six months from January 1 to support the market. This is underpinning the markets early Monday. Libya›s output rose above 800,000 bpd for the first time since 2014, when a second civil war broke out, the country›s National Oil Corp. reported last week.

"Stronger demand into 2018 and 2019 would surely help clear the global glut".

For this reason, Saudi Arabia and its Gulf Arab allies are expected to absorb the bulk of the recent production cuts compared with Iran and Iraq, which sit outside the Gulf bloc in the Middle East. In its latest assessment of oil markets, OPEC estimated non-OPEC production growth of 0.95 million b/d in 2017, a considerable upward revision from where it had previously pegged production from outside the group.

"There is of yet no long-term strategy for dealing with shale oil, so any rebalancing will be temporary", Omar Al-Ubaydli, an affiliated senior research fellow at George Mason University, said. "They [the Iranians] will be treated like everybody else", said the oil minister.

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Saudi Arabia now produces close to 10 million bpd, Falih said.

The oil producers also aim to facilitate a deeper cut in output, OPEC sources told Reuters on Friday.

"We think we have everybody on board", al-Falih said in an interview with Bloomberg television in Riyadh on Saturday.

"Our interest is stable, healthy, balanced supply and demand on a global level, and for us to achieve that, we need stability for United States shale". "Although OPEC is apparently putting on a renewed push to support values, this looks like the only significant bullish consideration now available to the energy complex", Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates said in a note. While OPEC and its partners will have been limiting output, production from North America and elsewhere will continue to gather pace. "But the key is if Opec can get the curve backward, shale hedging will slow down and that's very important".

"OPEC and non-OPEC countries are working together, and that should encourage investment".

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OPEC's members brought in less cash from selling oil in 2016 than in any of the past dozen years.

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