Why ongoing OPEC-led supply cuts may not end till June

…As Oil prices hit $56.39pbrrl

Motolani Oseni

There are clear indications that the ongoing Organisation of Petroleum Exporting Countries (OPEC)-led supply cuts unlikely to end earlier before June 2019, even as crude oil prices rose marginally yesterday.

Although the increase in the oil prices was said to have been driven by comments from Saudi Arabian oil minister, Khalid al-Falih, for instance,

the U.S. West Texas Intermediate (WTI) crude oil futures stood at about $56.39 per barrel at 0323 GMT, up 32 cents, or 0.6 per cent from their last close on Friday, but Brent crude futures were at $65.04 per barrel, up 30 cents, or 0.5 per cent.

Last December, OPEC members and their non-OPEC allies agreed to cut a total of 1.2 million barrels of crude oil from their supplies based on the October production levels.

While OPEC members agreed to cut about 800,000 barrels, their non-OPEC allies led by Russia resolved to cut their output by 400,000 barrels, in a bid to strengthen crude oil prices, tighten and stabilize the crude oil market.

The resolution was to be subject to a review to either extend the cut by June or discontinue after the monitoring team has reviewed the impact.

Despite the gains, commodities markets were somewhat held back after U.S. employment data raised concerns that an economic slowdown in Asia and Europe was spilling into the United States, where growth has so far still been healthy.

“Downward revisions in global growth forecasts by OECD and ECB have capped bullish gains,” said Benjamin Lu of Singapore-based brokerage Phillip Futures.

Oil markets have generally been supported this year by this ongoing supply cuts.

The OPEC is scheduled to meet in Vienna on April 17-18, with another gathering scheduled for June 25-26, to discuss supply policy.

Saudi oil minister Khalid al-Falih told Reuters on Sunday it would be too early to change OPEC output policy at the group’s meeting in April.

“We will see what happens by April. If there is any unforeseen disruption somewhere else. But, barring this, I think we will just be kicking the can forward,” Mr Falih said.

Prices were also supported by U.S. energy services firm Baker Hughes’ latest weekly report showing the number of rigs drilling for new oil production in the United States fell by nine to 834.