OPEC panel looking at deepening, extending oil cuts

OPEC panel looking at deepening, extending oil cuts

OPEC kingpin Saudi Arabia and non-member Russian Federation, the world's top two oil producers, have agreed on the need to keep the current cut in place until March 2018.

"In terms of delivering an initial boost to the price, the production cuts were successful", said Ganguli. Oil prices now trade between $45 and $55 a barrel, up from $26 a barrel in February 2016.

"OPEC, the IEA and the US Energy Information Administration all agree that markets should be balancing within the second half of the year". They hope the measure will drive oil prices to $60 per barrel or even more.

OPEC meets next week to decide whether to extend its six-month deal to cut output. The government reported the number of first-time claims for unemployment protection for the week ending May 13 was down 4,000 from the previous week and the less-volatile four-week moving average declined by 2,750. "How much is going to come out?"

Then there's the possibility that the agreement is extended, but with a "more stringent" cut, said Ganguli, pegging the chances of this happening at just 10%. Now you have a higher inventory level to begin with, and a slower decline.

Meanwhile, the U.S. government has commended Nigeria for the significant steps it has taken to reform the oil and gas industry through the National Oil, Gas and Fiscal policies as well as the draft Petroleum Industry Governance Bill and Petroleum Industry Fiscal Bill developed by the Ministry of Petroleum Resources.

The state of inventories appears more mixed in Asia.

OPEC leader Saudi Arabia has said it wants to see prices above $60 per barrel by the end of the year and promised to do "whatever it takes" to help clear a global glut. Record breaking US inventory figures in the first quarter were also weighing on the oil prices.

Traders also seem to be overlooking the persuasive argument that given huge stockpiles and less-than-stellar global demand, an OPEC extension without deeper cuts will have minimal positive impact. "On the other, there are those who are focused on the real drawdowns that have started to occur in USA oil stocks over the past month or so".

"Iraqi oil is a good alternative to other heavy grades from OPEC".

Meanwhile, the price for June futures of West Texas Intermediate (WTI) has grown by 0.75 percent and stood at $49.72 per barrel.

Brent for July settlement added 5 cents to $50.89/bbl on the London-based ICE Futures Europe exchange. The contract earlier rose to the highest since April 21 and is on track for a almost 4 percent climb this week, its second week of gains.

Still, the patchy evidence of draining storage has fallen far short of what investors expected after OPEC and non-OPEC nations agreed on production cuts last November.

"If you look at what's happened since the beginning of the year, [the market has] tried to trade the OPEC production cuts, the big draws in the US inventories, and it got stung once in April and again in May", he said. "We're still in excess, and there's lots of inventory around".