Published: Sat, May 13, 2017
Markets | By Erika Turner

Iraq, Algeria support extension of oil production cuts

Iraq, Algeria support extension of oil production cuts

In the research note entitled Oil Nearing Capitulation, Goldman Sachs said there was "growing evidence of the ability of USA shale to respond near $50 per barrel and the availability of capital to support such activity", according to MarketWatch.

"A bigger than expected drop in oil and fuel stocks received the initial bullish attention".

Questions remain about the effectiveness of OPEC-led cuts, with OPEC member Libya saying the country's production exceeded 800,000bpd for the first time since 2014 and could rise to 1.2 million bpd later this year.

Prices surged immediately after the agreement in November, but have come under pressure in recent weeks as USA production has ramped up and pushed back expectations for when the oil market will come into balance.

Currently, OPEC is planning to extend the tenure of this oil curb to the year-end or to next year.

Oil prices fell, rattled by concern over slowing demand, a rising United States dollar and increasing U.S. crude output that has shaken investors' faith in the ability of OPEC to rebalance the market. The twelve member states will be joined by Russian Federation, but USA production remains a concern. US light crude oil CLc1 was up 35 cents at $47.68.

The larger-than-expected drop came alongside weaker imports, which averaged over 7.6m barrels per day last week, down by 644,000 barrels per day from the previous week.

WTI was on track to post its best performance since November 30, the day the Organization of the Petroleum Exporting Countries agreed to cut their production to reduce brimming global crude stockpiles.

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The Organization of the Petroleum Exporting Countries and non-OPEC producers, such as Russian Federation, decided late a year ago on an output cut of 1.8 million barrels per day (bpd) to reduce global oil inventories.

As a result, OPEC cut the forecast 2017 demand for its crude by 300,000 bpd.

While Saudi Arabia and non-OPEC nation Russian Federation signal they could extend cuts into 2018, concerns remain about the pace of rising US supply, which the EIA sees climbing to a record next year.

Stocks at the Cushing, Oklahoma, delivery hub for US crude futures USOICC=ECI fell 438,000 barrels, EIA said.

Global investments in exploration and production have also fallen behind, potentially creating a big supply-demand gap in the next few years, he said.

Investors are now waiting to see if those numbers are confirmed on Wednesday by official figures on weekly US crude and oil product inventories from the USA government's Department of Energy, due out at 1430 GMT. The EIA also raised its production forecast for 2018 from 9.9 million barrels a day to "almost" 10 million barrels.

OPEC and the non-OPEC producers also cutting output meet on May 25 and are expected to extend the supply cut at least into the second half of the year.

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