Oil Back On The Rise, As OPEC Deal Extension Seems Likely

Oil’s New Home

OPEC and its allies can only hope that increased US production won't jeopardize its aim of bringing down global crude stockpiles to the five-year average-putting a floor under prices and making sure they don't plummet.

Oil prices have gained support from the supply cut pact but high inventories and rising US production have acted as a brake on the recovery.

The global market for crude oil is welcoming more oil in the form of exports from US offshore basins in the Gulf of Mexico.

Earlier, Saudi Arabia and Russian Federation made a joint statement, saying during the OPEC meeting to be held May 24-25, they will propose the extension of the output cut deal by nine months.

The cartel is billed to meet in Vienna later this month, to discuss possible extension of output cut.

Oil shipments from North Sea to Asia have also increased to 19 tankers in the same time period.

Shipping data in Thomson Reuters Eikon shows that USA oil exports to Asia have soared from just a handful of tankers per quarter throughout 2015 and 2016, to 10 tankers in the first quarter of this year, a figure expected to rise. U.S. benchmark crude was up 61 USA cents at US$49.96 a barrel. General nervousness ahead of OPEC meeting on May 25, may lead to a continuation of the move. "There is a long way to go before we arrive at five-year average stock levels", said Sukrit Vijayakar, director of Trifecta energy consultancy.

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Of course, OPEC is working to put the market in a place where demand outstrips supply.

It seems that the Organization of Petroleum Exporting Countries (OPEC) may be losing control of oil prices worldwide.

Brent crude LCOc1 was up 28 cents, or 0.5 percent, at $52.79 at 0630 GMT, according to Reuters.

Gasoline inventories recorded a draw of 0.4 million barrels on the week and stocks are 1.1% above year-ago levels.

Extending the cuts further to 2018 is now very likely which will definitely help the prices go up in the near future.

Russia's largest oil producer Rosneft said on Thursday it was ready to stick to crude output agreements with Opec.

If the victor is Ebrahim Raisi, a critic of Iran's nuclear deal with the West, the bank said new sanctions "would then very likely be imposed. which could reduce the oil supply from Iran even in the short term". We could revise our price view higher should production costs begin to pick up at a faster rate than producers can improve efficiency. "Basra is sold at a huge discount to Dubai or other heavy grades in spot markets, whereas Saudi oil is available only at the OSP (Official Selling Price)", said Ehsan Ul Haq, Senior Analyst at KBC Energy.

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