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tiptrot.com June 26, 2017


Oil halts gain as more U.S. rigs counter OPEC-cut deal report

16 May 2017, 07:00 | Deanna Wagner

Oil halts gain as more U.S. rigs counter OPEC-cut deal report

Oil halts gain as more U.S. rigs counter OPEC-cut deal report

A barrel of Brent Crude jumped to $52.52 following a meeting in China between the two countries.

Libya is increasing oil output with less than two weeks to go before the world's biggest exporters decide whether to extend production cuts to clear a supply glut, Bloomberg reported.

But with USA oil output rising and the first phase of the OPEC/non-OPEC agreement proving a disappointment there may be greater caution this time.

Under the current agreement, the Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, and other producers including Russian Federation pledged to cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year.

Russian Federation and Saudi Arabia together produce about 20 million bpd of crude, equivalent to one-fifth of global consumption.

Some analysts doubted that the producers would stick to a prolonged curb."Extending the cuts until March 2018 would take account of the fact that demand in the first quarter of a year is lowest for seasonal reasons", said Commerxbank analyst Carsten Fritsch.

With a nine-month extension now the minimum expectation for the OPEC meeting, the group has a lot of work to do to persuade its members and some non-OPEC producers to back the move.

A central part of their problem is the United States shale oil business and the competition to the established industry it has come to represent in the past decade.


Four months after the OPEC/NOPEC deal took effect, oil prices dropped to the levels preceding the agreement, amid concerns over still stubbornly high inventories and rising USA output.

In its monthly report last week, OPEC said that global markets are still suffering from oversupply and it appealed to other producers, including the USA, to stop pumping so much. "They are the most important countries taking part and without their agreement you would not be able to get other countries to come onboard".

Natural gas and NGL prices are much higher than they were a year ago.

The U.S. operators have built up a new inventory of drilled uncompleted wells (DUCs) as the rig count recovery has been outpacing completion growth since the second half of 2016.

An agreement to cut production was reached in September last year, but the deal was due to run out later this year.

These would be phenomenal achievements for a country which was pumping just 600,000 barrels of oil per day when Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries had reached an agreement to slash production late previous year.

Earlier this month, oil prices hit a five-month high, but have wobbled over fears that producers may be unwilling to hold their nerve and limit production. The market will also be looking at export cuts and not just production cuts, which is what is required to rebalance the market."noted Virendra Chauhan, an analyst at Energy Aspects". Last year they agreed the first joint output cuts in 15 years despite major political differences, including their support for opposite sides in the Syrian war.



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