Saudi says extending oil cuts, adding small producers enough to drain stocks

Saudi Arabia's energy minister Khalid al Falih at a meeting of the Organization of the Petroleum Exporting Countries OPEC

The extension through the first quarter of 2018 will help producers reach their goal of trimming global stockpiles to a five-year average, Khalid al-Falih said.

"We have full commitment from the Russian side, including President (Vladimir) Putin himself", Falih told reporters on the sidelines of summits between US President Donald Trump and Muslim leaders from around the world.

Oil prices have gained support from reduced output, but high inventories and rising supply from producers not participating in the accord, such as the United States, have limited the rally, pressing the case for extending the curbs.

OPEC members in November a year ago had agreed to cut 1.2 million barrels a day of oil production and during this meet the members will contemplate "whether to extend the current six-month production-cut deal beyond the mid-2017 expiration, and whether agreed-upon reductions should be increased".

"We think we have everybody on board", Al-Falih said earlier, in an interview yesterday with Bloomberg television. "Everybody I've talked to indicated that nine months was a wise decision". An expansion of the cuts at officially settled upon volumes is expected to achieve the objective of merging world inventories to their five-year normal, Kuwait's Oil Minister Issam Almarzooq said on Tuesday in his email.

An oversupply of oil has been affecting the global oil producers since the second half of 2014, when U.S. shale production skyrocketed, proving disruptive to the existing structure of global oil trading.

"Our interest is stable, healthy, balanced supply and demand on a global level, and for us to achieve that, we need stability for USA shale".

OPEC's national representatives and officials from its Vienna secretariat met on Wednesday and Thursday, sources said.

An OPEC panel reviewing scenarios for the oil producer group's meeting next week is looking at the options in an attempt to drain inventories and support prices.

This time round, Iran won't be exempt, Mr Al Falih said.

"We will do whatever is necessary", he said, expressing an openness to "creative" solutions.

Several OPEC countries have spoken out in recent weeks in favour of extending the cuts. The deal, formulated late past year and implemented in January, said originally that a six-month extension was possible if market conditions warranted the move. Iraq is OPEC's second-largest producer; Saudi Arabia, the biggest. Inventories in 35 of the world's most industrialized nations-the Organisation for Economic Cooperation and Development-were just above 3 billion barrels in April, or about 307 million above their five-year average, data from the US Energy Information Administration shows. We're coming into high demand season, so I think everything is coming together with a consensus among producers, demand rising, and the global economy doing well; Japan, Europe and the USA are all doing reasonably well economically. Producers are working on fixing some "deviations" to the output limits set when they agreed on the cuts past year, he added.

Saudi Arabia now produces close to 10 million bpd, Falih said. "We did go the extra mile initially to set an example and be a role model, and I think our colleagues appreciated that and responded positively".


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