NEW YORK, May 15 Oil jumped 2 percent to its highest in more than three weeks on Monday, topping $52 a barrel after Saudi Arabia and Russian Federation said that supply cuts need to last into 2018, a step towards extending an OPEC-led deal to support prices for longer than first agreed.
In a joint statement Opec's de facto leader Saudi Arabia and Russian Federation, the world's second largest oil producer, said they had come to the conclusion that the agreement needs to be extended.
Analysts are expecting Opec to extend the agreement for another six months when the cartel meets later this month, and there appears to be a consensus emerging among nations involved in the original pact to extend the agreement beyond June, according to Saudi Arabia's Opec governor, Adeeb Al-Aama.
The price for Brent crude oil was up 3.25 percent about a half hour before the start of trading in NY to $52.52 per barrel. WTI is now trading at $48.6 per barrel, up 1.5 percent for the day so far and Brent is trading at 43 per barrel premium to WTI.
The ministers pledged "to do whatever it takes" to reduce global inventories to their five-year average and expressed optimism they will secure support from producers beyond those in the current deal, the statement said. The ministers agreed the deal should be extended through the first quarter of 2018 at the same volume of reductions, they said.
If OPEC fails to reach a deal in May, experts predict another drastic slump in oil prices and some economic problems for the global economy. However, we'll see whether the rebound remains until the USA market opens.
Libya pumped as much as 1.6 million barrels a day before an uprising in 2011, and it was exempted from OPEC's cuts due to internal strife.
The UK's blue-chip index reached 7,460 points in early morning trading before falling back to 7,450 points, after climbing to a record high on Friday.
U.S. drillers added nine oil rigs in the week to May 12, bringing the total count up to 712, the most since April 2015.
Although the actual meeting for OPEC and NOPEC isn't scheduled until May 25th, the timing of this announcement from the largest producer and the largest exporter (25% of global production between them), was a complete surprise and probably a testament to two things.
"That said, we are skeptical about Russia's willingness to actively participate in any extended cuts".
In fact, an extension of the cuts should go hand in hand with guidance of future production increases by low cost producers, in our view, with an already notable emphasis by Saudi and others that oil prices will likely remain in a $45-55/bbl long-term range, in line with our forecasts.
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