Oil jumped by over 3% Monday as Saudi Arabia and Russia agreed on the need to rein in output for another nine months.
U.S. crude was up $1.54, or 3.22% at $49.38 at 08:15 ET. Brent crude added $1.57, or 3.09%, to $52.41.
Saudi energy minister Khalid al-Falih and his Russian counterpart Alexander Novak issued a statement saying the output cut deal should be extended to March of next year.
OPEC and non-OPEC producers have agreed to cuts of 1.8 million barrels a day in the first half.
Russia and Saudi Arabia said an extension of the deal was needed to reduce stockpiles and balance prices.
A formal decision on the extension is expected at a meeting on May 25.
Oil Price - May 15
Oil Price - May 15
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - May 15
Zacks comments below:
Oil prices, which were under immense pressure from higher U.S. output and increased inventories, jumped more than 3% at the time of writing after the world's two top oil producers agreed to extend their production cuts for nine more months.
Saudi Arabia and Russia, which together control a fifth of global supplies, are at the forefront to extend the Organization of the Petroleum Exporting Countries (OPEC) output cut deal from the first half of 2017 to the end of the first quarter of 2018 to rein in the supply glut and stabilize the market. According to them, extending the curb at already agreed-upon volumes would bring global inventories to the five-year average. As per the International Energy Agency (IEA), demand will significantly exceed production if OPEC and its partners extend their cuts into the second half of the year.
OPEC, which accounts for one-third of the global output, Russia and other producers originally agreed to curb production by 1.8 million barrels per day in the first half of 2017, with a possible six-month extension (read: Output Cut to Be Extended? Leveraged Energy ETFs to Play).
The move will likely encourage other countries in the 14-member cartel and Russia to join the extended agreement at OPEC's meeting on May 25. Early in the month, Kuwait also gave its support to the extension of an OPEC agreement to cut crude oil production beyond June.
As a result, it instilled fresh optimism in the energy sector, leading to a rally in the stocks though rising crude stockpiles and increasing oil production in the U.S. will continue to weigh on the prices. Given this, many investors have turned bullish on the energy sector and are seeking to tap this opportunity.
Oil prices, which were under immense pressure from higher U.S. output and increased inventories, jumped more than 3% at the time of writing after the world's two top oil producers agreed to extend their production cuts for nine more months.
Saudi Arabia and Russia, which together control a fifth of global supplies, are at the forefront to extend the Organization of the Petroleum Exporting Countries (OPEC) output cut deal from the first half of 2017 to the end of the first quarter of 2018 to rein in the supply glut and stabilize the market. According to them, extending the curb at already agreed-upon volumes would bring global inventories to the five-year average. As per the International Energy Agency (IEA), demand will significantly exceed production if OPEC and its partners extend their cuts into the second half of the year.
OPEC, which accounts for one-third of the global output, Russia and other producers originally agreed to curb production by 1.8 million barrels per day in the first half of 2017, with a possible six-month extension (read: Output Cut to Be Extended? Leveraged Energy ETFs to Play).
The move will likely encourage other countries in the 14-member cartel and Russia to join the extended agreement at OPEC's meeting on May 25. Early in the month, Kuwait also gave its support to the extension of an OPEC agreement to cut crude oil production beyond June.
As a result, it instilled fresh optimism in the energy sector, leading to a rally in the stocks though rising crude stockpiles and increasing oil production in the U.S. will continue to weigh on the prices. Given this, many investors have turned bullish on the energy sector and are seeking to tap this opportunity.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group