Sunday, 15 September, 2019

Oil gains as Opec and allies vow output cut extension

Egor Aleev  TASS Egor Aleev TASS
Ginger Lawrence | 13 June, 2019, 23:54

Front-month Brent crude futures, the worldwide benchmark for oil prices, were at $62.71 at 0630 GMT, 42 cents, or 0.7%, above Friday's close.

U.S. crude output has risen by 1.6 million barrels per day (bpd) over the past year, to a record of 12.4 million bpd, making the USA the world's biggest oil producer ahead of Russian Federation and Saudi Arabia.

Oil prices have more than halved in the past two years after Saudi Arabia raised output steeply in an attempt to drive higher-cost producers such as United States shale firms out of the market. U.S. West Texas Intermediate crude futures were down $1.39, or 2.6%, to $51.88 a barrel.

From his subsequent meetings with Russian Energy Minister Alexander Novak, Al-Falih has drawn the conclusion that "the oil market will need continued supply oversight, while making sure that we continue to guide the market towards stability".

"These countries account for more than three-fourths of our oil demand growth assumptions for this year and the revisions imply a 300,000 barrels per day reduction in our current global oil demand outlook of 1.3 million barrels per day year-on-year for this year", the British bank said. The deal is due to expire this month.

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Novak said that there are big risks of oil overproduction and the possibility of prices declining.

"Brent futures continue rising ... after the Saudi Arabian energy minister expressed confidence that OPEC+ producers will prolong their output cuts programme through the second half of 2019", said Han Tan, analyst at futures brokerage FXTM.

It reduced its 2019 world oil demand growth forecast by 160,000 barrels per day (bpd) to 1.22 million bpd, although it also wound back its forecast for 2019 United States crude production to 12.32 million bpd, 140,000 bpd less than the May forecast.

Oil prices stabilized on Tuesday on expectations that producer group OPEC and its allies will keep withholding supply to prevent prices from tumbling amid a broad economic slowdown which has started eating away at fuel demand growth.

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