Crude Oil Pulls Up Short Of USD50

Cornelia Mascio
Mag 20, 2017

May 16 Iraq is committed to reducing oil production to decrease a glut in the global market, and will support extending output cuts in line with any OPEC decision, Prime Minister Haider al-Abadi said on Tuesday.

According to the official Kuwait News Agency, known also as KUNA, Oil Minister Essam al-Marzouq "affirmed full support of the joint position" taken by Saudi Arabia and Russian Federation to extend the agreement to March 31.

"There are positive signals that have started to show, as April and May monthly reports are showing that global stockpiles have fallen significantly", Almarzooq said.

Crude sank to a five-month low earlier this month, rattled by concern over increasing USA crude output that has shaken investors' faith in the ability of OPEC to rebalance the market. Oil has surrendered about half its gains since the producers' accord to cut output late past year.

However, the 12 remaining OPEC members and other producers participating in the cuts have to agree to the extension during a meeting on May 25. "These combined volumes could largely offset the benefit of the extended cuts", Goldman Sachs said, keeping its average Brent price forecast for the third quarter at $57 per barrel.

Amid the cutbacks, production in the USA, which isn't part of the agreement, has risen to the highest level since August 2015. That would be crude's sixth straight weekly decline after hitting a record high at the end of March.

"Extending the cuts for another nine months may not eliminate the glut in the market", said Sadad Al-Husseini, a former executive vice president of exploration and development at Saudi Arabian Oil Co., the state producer also known as Saudi Aramco. Their announcement sparked a rally in oil prices, which had sagged on signs the cutbacks made so far haven't significantly depleted the world's brimming fuel inventories.

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