Published: Fri, May 19, 2017
Economy | By Annette Adams

Russia, Saudi call for oil output deal extension

Oil rose more than 2 percent on Monday to $52 a barrel after top exporter Saudi Arabia and Russian Federation said supply cuts needed to last into 2018, a step towards keeping an OPEC-led deal to support prices in place longer than originally agreed.

"Based on the consultations I have had with participating members I am rather confident the agreement will be extended into the second half of the year and possibly beyond", Saudi Oil minister Khalid al-Falih said at the Asia Oil and Gas Conference in Kuala Lumpur.

Brent crude, the global benchmark, had risen $1.20 to $52.04 a barrel by 0847 GMT and traded intraday at $52.26, the highest since April 26.

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.

Global crude oil supply inched down by 140,000 barrels daily last month, to 96.17 million bpd, the International Energy Agency said in the latest edition of its Oil Market Report.

Oil rode its longest rising streak in more than a month as a proposal by the world's two biggest crude producers to extend output curbs into 2018 boosted confidence that other nations will follow suit.

"According to our estimations what remains (of oil in storages - TASS) following the agreement will decline by around 100-120 mln barrels per day by July 1", he said, adding that "May and June (results) will be monitored".

"We believe the industry is more focused on robust activity at stable oil prices, rather than very high oil prices at this juncture, which is not sustainable over the long run", said its analyst Mabel Tan.

Oil prices rose on the news, after sinking last week on fears that the supply cuts would not be extended. Supplies of gasoline probably dropped 1 million barrels, while inventories of distillate fuel, a category that includes diesel and heating oil, slipped 1.45 million barrels last week.

Another 3-5 countries might join the agreement on reducing oil production by OPEC countries and non-cartel exporter countries, he went on. Oman, a non-OPEC producer like Russian Federation, expressed support the same day for curbs to continue until the end of March.

Amid strong production increases in the U.S. and Brazil, the International Energy Agency said non-OPEC output would grow by 600,000 bpd this year.

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