Published: Sat, May 20, 2017
Economy | By Annette Adams

Saudi signals first cut in crude supplies to Asian customers, sources say

Saudi signals first cut in crude supplies to Asian customers, sources say

Since a low point on May 27, 2016, US producers have added 387 oil rigs, or about 123 percent, Goldman Sachs said.

The increase from Saudi Arabia comes as OPEC and its allies are likely to extend and possibly deepen their current output cut agreement to remove 1.8 million barrels of oil from the market.

U.S. crude stockpiles posted their biggest weekly drawdown since December last week as imports dropped sharply, while inventories of refined products also fell.

OPEC will decide formally whether to extend the cuts when its ministers meet in Vienna on May 25. Aramco had previously been maintaining supplies to its important Asian customers.

Global oil prices recently dipped briefly under USD 50 dollars per barrel for the first time since OPEC and Russian Federation scaled back output as concerns whether the deal would be renewed and the impact of rising output in the United States weighed on the market.

Supply from the 11 OPEC members with production targets under the accord - all except Libya and Nigeria - fell to 29.674 million bpd last month, according to figures from secondary sources that OPEC uses to monitor output.

Oil capped a third weekly decline on Friday after dropping to levels last seen before the Organization of Petroleum Exporting Countries agreed in November to reduce output. WTI crude oil averaged $43.33 a barrel in 2016 and is forecast to rise to an average of $50.68 in 2017, down $1.56 a barrel compared with last month's estimate for 2017.

Global benchmark Brent crude was up 40 cents at $49.13 a barrel by 9:00am GMT. "This surprise increase in stockpiles, a barometer of the global oil market, casts doubts on the ability of the six months agreement to suffice", a spokesperson for consultancy Coface Group said.

Oil prices pared gains on Thursday after the release of the report to trade at less than $51 a barrel LCOc1 , below the $60 level that top OPEC producer Saudi Arabia would like to see.

Russian Federation said yesterday it was discussing prolonging cuts with other producers beyond 2017, without giving a clear timeline.

Oil prices rose on Monday in volatile trading, bolstered by statements from major oil-producing countries suggesting that OPEC and non-OPEC supply cuts could be extended into 2018.

The Saudi oil minister said recent price falls had been caused by seasonal low demand and refinery maintenance, as well as by non-OPEC production growth, especially in the United States.

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