Economy

Oil rises on promise from Saudis to limit exports next month

Oil rises on promise from Saudis to limit exports next month

With peak driving season commencing today coupled with Trump's probable intention to avoid a climate control agreement, we may well see crude oil benchmark futures prices steadily rising over the next three months leading to a significant boost for U.S. and Russian shale oil drillers.

In December 2016, OPEC and a number of countries outside the cartel agreed to withdraw 1.8 million barrels per day from the oil market in the first half of 2017.

Prices have fallen as low as $43 a barrel and remained well below $50 since the end of May when OPEC announced its plans to tackle oversupply.

Marzouq, whose country heads the joint ministerial committee, said attendees would discuss continuing the production cuts.

But both countries said they would need to keep pumping at a higher level before they could join the global effort to stem a supply glut, according to two people familiar with the planned talks. The agreement was also supported by 11 non-OPEC states, including Russian Federation that pledged to cut production by 300,000 barrels daily.

There was no discussion of deeper oil output cuts, but Falih said Nigeria, which is exempt from the deal, had signaled it was ready to cap its output at about 1.8 million bpd. The two have now increased their output by about 700,000 to 800,000 bpd since the OPEC-led pact was agreed.

On 25 May, Opec agreed with 10 non-OPEC producers led by Russian Federation to cut oil output by a combined 1.8 million barrels per day (bpd), from January 2017 until the end of March 2018, in a bid to support the oil price. The Kremlin offered mixed support for the agreement during negotiations past year after publicly stating in 2015 that coordinating with OPEC was an unsavory proposal. On Monday in St. Petersburg, OPEC Secretary-General Mohammad Barkindo said OPEC was in agreement to study "other parameters". Combined, the total oil and gas rig count in the U.S. now stands at 950 rigs, with oil rigs falling by one and gas rigs falling by one.

Brent for September settlement was 45 cents higher at $48.51 a barrel on the London-based ICE Futures Europe exchange.

In June and over the last six months, the agreement has been observed "98 percent", the participating countries said, with the result that total output has been cut by more than 350 million barrels of oil. Estimates are that OPEC production in July will exceed 33 million bpd, with production increasing from the United Arab Emirates, Nigeria, and even heavyweight Saudi Arabia.