Saudi minister confident of oil cut extension

OPEC members, Russian Federation and other oil producers had originally agreed previous year to cut production by 1.8 million barrels per day for six months starting January 1.

Membership of the cartel equalled access to new investment and markets, and a more dynamic role in global pricing and supply - a no-brainer for the African nation, which began production in 1991.

National representatives from OPEC and officials from several non-members in Vienna on Friday discussed the outlook for rising United States shale oil production, which has been diluting the price impact of their production cuts. Despite the agreement, oil prices have lingered below US$55 a barrel. Oil prices are a proxy for energy prices, and a rising oil price can be supportive for energy intensive metals like aluminum.

"In the first two months of 2017 OPEC members have demonstrated an unprecedented level of compliance with the production cuts agreed in late 2016", reports the Economist Intelligence Unit (EIU) in its March commodities forecast. However, the agency noted an improving outlook for US crude oil production, which is seen rising by 345,000 b/d from the previous year, and up 790,000 b/d from the end of 2016. It is required to reduce global stockpiles to the five-year average, reiterated energy ministers of the world's biggest crude producers.

Many of the OPEC members are backing this proposal says a monthly report from the International Energy Agency released on Tuesday.

Still, there are no end of experts who foresee good times ahead regardless of troubling fundamentals, and this week the loudest spokesman in this camp was Giovanni Staunovo, an analyst at UBS Group AG, who declared, "We still expect prices to move to $60 over the coming months because the oil market will be in a deficit as supply growth will lag demand growth".

OPEC has been urging other producers to join the supply pact.

In real dollar terms, the 2016 revenue represents a 15% decline from the $509 billion earned in 2015, mainly because of the fall in average annual crude oil prices and, to a lesser extent, because of decreases in OPEC net oil exports. The Economist Intelligence Unit estimates that United States crude production will rise by 2.8% by end of 2017. So maintaining the current discipline of production cuts is key and we expect the current quotas to hold for the most part.

Russia Behind the Headlines reports that in December oil supplies from the deposits controlled by the Kurds in Turkey reached 587,000 b/d, twice as high as the permitted quota of 250,000 b/d.

Given the continued increase in oil rigs that have been deployed, and the lag time it takes for them to enter production, that means that U.S. production levels are likely to lift significantly this year and next, says Vivek Dhar, mining and energy analyst at the Commonwealth Bank, creating a headache for other producers attempting to rebalance the crude market.

Meanwhile, OPEC and other major oil producers are eyeing extending oil production caps till the first quarter of 2018.

The two ministers said they had made a decision to recommend to their OPEC and non-OPEC peers that the 1.8 million barrels per day of combined production cuts in force since January this year be rolled over to March 2018. In his view, until the meeting in Vienna, oil prices will continue to rise.



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