RIYADH, MOSCOW FAVOUR EXTENSION
Move necessary to reach goal of reducing global inventories to 5-year low, they say
SAUDI Arabia and Russia said they favour prolonging oil output cuts by global producers through the end of the first quarter of next year, setting a firmer timeframe for a likely extension of the curbs into next year.
Crude prices jumped. Extending the curbs at already agreed-upon volumes was needed to reach the goal of reducing global inventories to the five-year average, said the energy ministers of the world’s biggest oil producers in a joint press conference, here.
They will present their position ahead of a meeting between Organisation of the Petroleum Exporting Countries (Opec) and other nations that are part of the agreement in Vienna this month.
Russia and Saudi Arabia, the largest of the 24 nations that agreed to a deal to cut production for six months starting in January, are reaffirming their commitment to the deal amid growing doubts on its effectiveness.
Surging United States production has raised concern that Opec and its partners are failing to reduce an oversupply.
Oil has surrendered most of its gains since their deal last year.
“The agreement needs to be extended as we would not reach the desired inventory level by end of June,” said Saudi Arabia’s Khalid Al-Falih during the event with Russia’s Alexander Novak.
“Therefore, we came to the conclusion that ending would probably be better by the end of first quarter next year.”
Oil futures jumped as the ministers spoke. US West Texas Intermediate added 1.8 per cent to US$48.70 (RM214.20) a barrel on the New York Mercantile Exchange, the highest since May 2.
Global benchmark Brent crude added 1.7 per cent to US$51.69 on the ICE Futures Europe exchange. Both are still more than 50 per cent below peaks in 2014.
As Opec and its allies curb supply, production in the US, which is not part of the agreement, has risen to the highest level since August 2015 as drillers pump more from shale fields.
But American crude inventories are showing some signs of shrinking, falling for the past five weeks from record levels at the end of March. Bloomberg
Saudi Arabia’s Energy Minister Khalid Al-Falih (left), and Russia’s Energy Minister Alexander Novak at a news conference on the sidelines of the Belt and Road forum in Beijing yesterday.