Oil Rises With New OPEC Deal

Jeannie Matthews
October 7, 2017

Putin was reported to have said that the deal could be extended well past its expiry in March 2018.

Russian Federation is cutting more oil production than it agreed to under the OPEC-led arrangement.

“Compliance with the OPEC production cuts was over 100 percent in August (meaning members produced less than their quotas, on average) and USA oil inventories have been declining for several months now, ” said William O‘Loughlin, investment analyst at Australia's Rivkin Securities.

U.S. West Texas Intermediate (WTI) crude CLc1 was at$49.35, down $1.44 or 2.8 percent on the day.

Saudi Energy Minister Khalid al-Falih was speaking in a television interview a day after Russian President Vladimir Putin said the supply reduction deal that is due to expire in March could run to the end of next year.

"As satisfied as we are with the progress made, I think you agree that our job is not done and there are still uncertainties and headwinds on global oil markets", he said.

While Moscow this week was the scene of renewed relations between Russian Federation and Saudi Arabia as well as statements that their efforts to curb the global glut have been beneficial to crude markets, Vitol, the world's largest oil trader, on Thursday reiterated a familiar and contradictory message: that oil demand will peak and the industry will shrink in coming years.

Fitch forecasts global benchmark Brent crude to average $52.50 per barrel in the fourth quarter of this year and for next year, and $55 a barrel in 2019.

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"Gains in the oil market have been restricted by the resuming of production at Libya's Sharara oilfield, as well as the improvement of USA crude exports".

As for the overall price of oil, Novak said, $50 to $60 per barrel is an "optimum" range.

Bloomberg noted that it was oversupply thanks to Harvey that drove the higher exports, and it was also to blame for the current decline in WTI prices and the growth of its discount to Brent.

Lower demand from U.S. Gulf Coast refiners that are still recovering from Hurricane Harvey in August has caused crude sellers to seek markets overseas, triggering shipments of 1.98 million barrels a day, the highest level in weekly government data compiled since 1993.

The drops came over concerns that a third-quarter market rally that had lifted Brent to mid-2015 highs by late September had been overdone.

Production at Libya's Sharara field increased to 200,000 barrels a day as it reopened after a halt forced by gunmen on Sunday, said a person with knowledge of the matter.

Investors were also watching Tropical Storm Nate as companies shut down some oil production in the Gulf of Mexico ahead of its expected arrival in the area as a hurricane on Sunday.

Some analysts say U.S. oil output growth will slow as energy firms cut the number of rigs drilling for oil.

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