By Sara Israfilbayova
Crude prices rose on May 16 following the announcement that Russia and Saudi Arabia want to extend oil production cuts through the first quarter of 2018, in a move the two major producers say would support the market price.
On NYMEX (New York Mercantile Exchange) cost of the US Light crude oil increased $0.19 to stand at $49.04. Price of the Brent crude oil at the London ICE (Intercontinental Exchange Futures) rose $0.18 to trade at $52.
The price of a barrel of Azeri Light crude oil increased $1.49 to stand at $53.11 on the world markets.
Both countries want to extend the deal, which encompasses both nations in the Organization of the Petroleum Exporting Countries and some non-OPEC countries like Russia.
The Russian side said that extending the cuts through March 31, 2018, would show “producers’ determination to ensure stability, predictability and incremental development of the market.”
Russia and Saudi Arabia will now hold consultations with other producers “with the aim of achieving complete consensus” on the extended production cuts before the scheduled OPEC meeting May 25 in Vienna.
In December 2016, OPEC and non-OPEC producers reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.
Oil producers have been trying to boost prices, as crude futures trade around $50 a barrel, less than half their level from early 2014, though above the low of below $30 in early 2015.
The joint announcement by Russia and Saudi Arabia supported an earlier statement made by major producers Iraq and Algeria, which argued for extending the cuts through the end of the year. Kuwait's oil minister Essam al-Marzouq said on Tuesday that his country supported the Saudi/Russian initiative. Azerbaijan also supports prolonging the supply curbs, said earlier Energy Minister Natig Aliyev.
"The agreement needs to be extended as we will not reach the desired inventory level by end of June," said Khalid Al Falih, Saudi Arabia’s energy minister, said during the event with his Russian counterpart, Alexander Novak. "Therefore, we came to the conclusion that ending [the deal] will probably be better by the end of first quarter 2018."
Russia’s president Vladimir Putin said later on the same day that it’s right that the decision was made not for two, three, four months but for nine months.
"That is the most important condition for stability," he said at a separate press conference in Beijing. “There’s a "good chance" that Russia, a non-OPEC nation, will extend its cooperation with the organization because Saudi Arabia wants price stability and is complying with its obligations in the deal.”
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