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SINGAPORE, 15 May 2017:
Oil prices jumped by over 1.5% today after the Saudi Arabian and Russian energy ministers said in a joint statement an OPEC-led crude production cut would be extended from the middle of this year until March 2018.
Brent crude was at US$51.68 per barrel at 0327 GMT (11.27am Malaysian time), up 84 cents, or 1.7%, from their last close.
US West Texas Intermediate (WTI) crude was at US$48.64 per barrel, up 80 cents, or 1.7%.
Saudi energy minister Khalid al-Falih and his Russian counterpart Alexander Novak met today in Beijing and said a joint deal to cut crude supplies in order to prop up the market would be extended from the middle of this year until March 2018.
“The two ministers agreed to do whatever it takes to achieve the desired goal of stabilising the market and reducing commercial oil inventories to their 5-year average level, as well as to underscore the determination of oil producers to ensure market stability,” the joint statement said.
The Organisation of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, and other producers led by Russia, pledged late last year to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017.
The extension of the cut into the first quarter of next year will initially be on the same volume terms as before, although the ministers said they hoped other producers would join the efforts.
“The ministers also expressed optimism that a wider circle of countries outside the current group will see the benefit of this cooperation in bringing stability to oil markets, and will join the effort.”
Traders said it was significant that the joint statement by the world’s two top oil producers came before the May 25 OPEC meeting.
“Saudi and Russia are clearly working closely together. Saudi seems very determined to push oil prices higher by making this joint statement now,” said Oystein Berentsen, managing director for oil trading company Strong Petroleum in Singapore.
Russia is the world’s biggest oil producer, while Saudi Arabia is the biggest exporter. Together, they control around 20 million bpd in daily output, equivalent to a fifth of daily global consumption.
Undermining efforts by OPEC and Russia has been the US, which did not participate in the agreement to cut supplies.
US drillers added nine oil rigs in the week to May 12, bringing the total count up to 712, the most since April 2015, energy services firm Baker Hughes said on Friday.
Current US production is at 9.3 million bpd, up more than 10% since its mid-2016 trough.
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