Iraq, Algeria support extension of oil production cuts

Iraq, Algeria support extension of oil production cuts

Oil prices have since gained support but global inventories remain high, pulling crude LCOc1 back toward $50 a barrel and putting pressure on OPEC to extend or possibly add to the cuts at least until the end of 2017.

Analysts said a larger-than-expected fall in USA crude inventories last week, by 5.3 million barrels, continued to keep Brent above US$50, with the data viewed as a possible sign OPEC-led cuts were tightening the market.

The relative cost of options protecting against a drop in West Texas Intermediate crude has fallen to its lowest since August, thanks to a big drop in producer hedging, Societe Generale SA said on Friday.

Iran's oil output decreased by 34,700 barrels per day in April month-on-month to 3.759 million barrels per day (mb/d), OPEC reported May 11.

OPEC claims raising global oil prices will "require the collective efforts of all oil producers" and should be done "not only for the benefit of the individual countries, but also for the general prosperity of the world economy".

Oil prices pared gains on Thursday after the release of the report to trade at less than $51 a barrel, below the $60 level that top OPEC producer Saudi Arabia would like to see.




OPEC could try even deeper production cuts but OPEC members won't like that. US light crude oil CLc1 was down 29 cents at $47.54. The U.S. surpassed both Saudi Arabia and Russian Federation in 2015 as the world's largest and fastest-growing producer of oil.

It also forced USA producers to become more efficient, and they can now withstand much lower prices than just a few years ago.

"Three months later (after the OPEC-led deal), we see the USA rig count double and it says ‘this isn't the only driver in the market any more". A lack of infrastructure limits its exports, according to the U.S. Energy Information Administration. The fiscal outlook for the country looks so dire when compared to 2013's surplus of $48 billion, that the International Monetary Fund warned it could go through its fiscal reserves within five years. Even with this week's drawdown in United States crude stocks, Glickman said the country has a way to go to reduce oversupply.

Meanwhile, OPEC kingpin Saudi Arabia has been sending positive signals to the market in a bid to prop up prices, in the run up to a meeting on May 23 to extend the output cuts they had first been orchestrated at the start of the year.

A day later, "we're seeing a pullback in price", said Andrew Lipow, president of Lipow Oil Associates in Houston.

US shale producers used the price spike that OPEC triggered earlier this year to lock-in revenues for 2017, 2018 and, in some cases, even 2019.

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