By Kamila Aliyeva
Monday recorded a rise in world oil prices amid rumors about possible extension of the oil output cut deal.
On NYMEX (New York Mercantile Exchange) cost of the US Light crude oil increased $0.38 to stand at $47.86. Price of the Brent crude oil at the London ICE (Intercontinental Exchange Futures) rose $0.23 to trade at $54.01.
Saudi Arabian Energy Minister Khalid al-Falih earlier discussed with his Venezuelan and Kazakh counterparts the possible extension of the global oil supply cut agreement beyond March 2018.
Previously, Russia’s Energy Minister Alexander Novak also held talks with his Saudi counterpart about further extension to the OPEC+ deal.
The deal to curb output brought crude prices above $58 a barrel in January but they have since slipped back as the effort to drain global inventories and stabilize the oil market has taken longer than expected.
Experts consider that there are not any new options as OPEC+ countries can either keep on cutting oil production and loose market share or they can turn the taps back on and bring prices down.
Currently, Saudi Arabia is gathering support among the OPEC and some non-OPEC countries to extend the duration of the output-cut agreement because it is becoming evident that the oil market may not rebalance by the end of Q1 2018, senior energy analyst at Interfax Energy's Global Gas Analytics (GGA) in London Abhishek Kumar believes.
The expert told Azernews that despite all the talks on the options, which include extending and deepening the cut, it is unlikely that there will be enough support to deepen the cut.
Effectiveness of the OPEC+ agreement will continue to be influenced by the oil-production profile in the United States.
The U.S. oil output is already rising and any uplift in oil prices will further boost production, according to the expert. While parties to the deal hope the oil market will eventually rebalance, growing oil production in the U.S. will prolong this period, he noted.
"There will also be a push from some countries in the November OPEC meeting to discuss an exit strategy from the agreement. However, it would be a challenge to incorporate the U.S. oil-output profile in any exit plan,” the expert added.
The OPEC+ plans to discuss the issue of the prolongation in November in Vienna.
OPEC and other major oil producers such as Russia, Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan reached an agreement in December 2016 to remove 1.8 million barrels a day from the market.
OPEC and its partners decided to extend its production cuts till March 2018 in Vienna on May 25, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.
Another factor influencing the oil market is the Hurricane Irma which has already caused electricity disruption in Florida. Earlier, Hurricane Harvey put pressure on U.S. oil sector. The US Department of the Interior’s Bureau of Safety and Environmental Enforcement said that roughly 13.5 percent of oil production in the Gulf of Mexico was also shut in on August 31.
Kamila Aliyeva is AzerNews’ staff journalist, follow her on Twitter: @Kami_Aliyeva
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