Oil price is inching towards the $54/bbl Monday as optimism spurred by OPEC’s output cuts confronts pessimism over rising US supply.
According to according to OPEC’s Secretary-General Mohammad Barkindo, the cartel’s crude stockpiles are starting to decline in a sign that the production cuts implemented this year are bringing the market to balance and this has helped the price of Brent higher at %53.60 a barrel in early trading.
Petroliam Nasional Bhd., Malaysia’s state oil company, said an extension of OPEC production cuts beyond the originally planned six months would provide more stability to crude prices.
With the second half of the year looking uncertain for oil, the outcome of the group’s gathering in May will have a “lot of bearing” on prices, Chief Executive Officer Wan Zulkiflee Wan Ariffin, said in an interview. Members of OPEC, which doesn’t include Malaysia, agreed in November to cut production for the first time in eight years in an effort to shrink a global inventory glut and revive crude since its slide began in 2014.
An overhang of an estimated 285m bbl of oil in storage has been a drag on crude prices even as OPEC and some non-members producers curbed output.
Six members of OPEC and Oman back extending production cuts beyond June, with Saudi Arabia and Kuwait saying oil stockpiles need to fall to the five-year average.
New data suggest that Russia cut its crude production in March, moving closer to fulfilling its agreement with OPEC as the deadline approaches.
Production of crude and condensate fell to 11.05m bbl/day, down 1.6% from Russia’s post-Soviet high of 11.23m bbl in October, according to data from the Energy Ministry’s CDU-TEK statistics unit. Russia has committed to reducing supply by as much as 300kbbl/day by the end of this month.
In the meantime, US oil explorers are showing no signs of letting up with Drillers added rigs targeting crude in the US for an 11th week, the longest uninterrupted stretch of additions since 2011.
The rig count rose by 10 to 662 this week, according to Baker Hughes Inc. data reported Friday. The number of working rigs has more than doubled from its 2016 low of 316 in May. Rigs rose in the Permian Basin by four, while the Eagle Ford also added a rig.
