Oil climbs as Opec, Russia agree to extend output deal
12 September 2019
Crude oil prices on Tuesday rose to the highest level since July after reports said oil cartel Opec and Russia have agreed to extend a deal on production curbs even as Opec head the group has been “very conservative” with its oil demand estimates.
Russian president Vladimir Putin on Tuesday said Russia has agreed with Saudi Arabia to extend by six to nine months a deal with Opec on reducing oil output.
Putin, speaking after talks with Saudi crown prince Mohammed bin Salman told a news conference the deal, which is due to expire on Sunday, would be extended in its current form.
The Saudi energy minister, Khalid al-Falih, said on Sunday that the deal would most likely be extended by nine months and no deeper reductions were needed.
Oil prices that had come under renewed pressure from rising US supplies and a slowing global economy, also took solace from a big dent in US stockpile..
Oil prices traded higher on Wednesday with Brent crude futures rising 51 cents, or 0.6 per cent, to $62.89 a barrel, while West Texas Intermediate (WTI) futures were up 54 cents, or 0.9 per cent, at $57.94 a barrel.
Crude futures on the New York exchange rose as much as 1.6 per cent on Tuesday, gaining for the fifth consecutive day.
Opec secretary-general Mohammad Barkindo told the World Energy Congress in Abu Dhabi on Tuesday that the cartel had been conservative with its oil demand estimates.
Investors were also keeping an eye on the upcoming weekly inventory report which is forecast to show U.S. crude supplies contracted by 2.9 million barrels.
Crude is still down more than 10 per cent from its peak in April as a prolonged US-China trade war dented demand outlook. Market is focused on the meeting of the Opec+ joint ministerial monitoring committee which is under way in Abu Dhabi.
An Opec report noted that the cartel increased output by 136,000 barrels per day to more than 29.7 mbd, primarily due to increased production by Saudi Arabia.
While world oil demand is forecast to increase around 1 million barrels per day (mbd) in both 2019 and 2020, the cartel said: "Nevertheless, this is expected to be outpaced by the strong growth in non-Opec supply." Opec expects non-Opec production to rise by nearly 2 mbd this year and 2.25 mbd next year, largely due to gains in the United States.
"This highlights the shared responsibility of all producing countries to support oil market stability to avoid unwanted volatility and a potential relapse into market imbalance," it said in the report.