Opec Likely to Extend Supply Cuts to Rebalance Market

The purge in Saudi under King Salman has led to a political upheaval leading to rise in crude oil prices

The country's light oil price was reported $50.39 on average since the beginning of 2017 until November 3.

"It would have been hard to try to rebalance the market alone and so I think there is a rationale for this group to stay together... and maybe even expand", the UAE's minister said at the Abu Dhabi International Petroleum Exhibition Conference (ADIPEC), as quoted by CNBC.

In May, Opec producers agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.2 million bpd agreed in November past year.

OPEC and other non-OPEC producers will meet on November 30 in Vienna to decide on oil output policy.

The cartel is said to be leaning toward a nine-month extension of the cuts to the end of 2018, and the market is already pricing this in to some extent, but in recent weeks there has been speculation as to whether the cartel and its allies will decide and communicate a firm decision for extension at the meeting at the end of this month. The UAE, Opec's fourth-largest producer, sees no need for the organisation to hold an extraordinary meeting in the first quarter of next year, he said.

The level of inventories held by industrialized above the five-year average "has fallen by more than 50 per cent in 2017, with inventories now at around 160 million barrels", consultancy Timera Energy said.

"Overall, there are a few reasons for confidence - compliance from OPEC - and it seems likely they'll extend the cut", said Jasper Lawler, a market strategist at London Capital Group, referring to the output deal due to expire in March.

In a related development, OPEC yesterday increased the forecast for 2018 demand for its crude by 360,000 bpd, from last month's report to 33.42 million bpd.

Brent crude futures were last down 34 cents on the day at $62.82 a barrel at 1212 GMT, while U.S. West Texas Intermediate (WTI) futures fell 27 cents to $56.49. Stockpiles have declined by more than 180 million barrels this year alone, Barkindo said.

Middle East tensions grew over the weekend, fueling expectations of supply disruptions in the region after Bahrain said Iran was behind an explosion to its main oil pipeline.

Oil was largely steady on Monday, trapped between a bullish push from tension in the Middle East and downward pressure from evidence of rising USA production, although record fund bets on a rally kept the price in sight of two-year highs.

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