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Published: Sun, June 04, 2017
Economy | By Melissa Porter

OPEC oil cut extension renews Asia's crude supply worries

OPEC oil cut extension renews Asia's crude supply worries

It noted that member countries, in agreeing to this decision, confirmed their commitment to a stable and balanced oil market, with prices at levels that are suitable for both producers and consumers. Investors hope that oil producers would be a step ahead.

"I don't think the cuts are enough for (OPEC) to reach their goal in a nine month period and this is reflecting that", said James Williams, president of WTRG Economics in London, Arkansas.

IHS said the resiliency of US shale oil production to crude oil prices that are still about half what they were three years ago is a challenge for the OPEC-led management effort because there's no central governing mechanism in place to limit output.

The cuts, agreed at a meeting of OPEC and other major producers led by Russian Federation in Vienna on Thursday, were aimed at tightening the market and support the plummeting prices.

The 1.8 million barrel-per-day cut first inked in November 2016 will now last until November 2018.

Oil prices edged up on Friday but markets remained on the back foot after tumbling in the previous session when OPEC and allied producers extended output cuts but disappointed investors betting on longer or larger curbs.

During the meeting, Khalid al-Falih reportedly said, while the oil market is on its way to recovery, "more time is needed" before oil supplies can be expected to return to their five-year average.

Brent crude futures were at $51.26 per barrel at 0500 GMT, down 20 cents, or 0.4 per cent, from their last close.

"The outcome of the OPEC meeting which was scheduled on 25th May 2017 made a decision to cut 1.8 million barrels per day through March 2018".

Year to date, USO has added more than $125 million in new assets, but there are some signs traders are growing exhausted of the fund from the long side as USO lost almost $15 million in assets since the start of the current quarter.

Opec said the cuts could be extended at the next meeting. "It appears that many in the market had been expecting deeper cuts despite guidance that this was very unlikely". Rising U.S. production could completely replace OPEC's output cuts of 1.2 million bpd by year-end, according to RBN Energy.

US crude CLc1 prices were flat at $48.88 early on Friday, after losing 4.8 percent overnight, set to end the week 2.8 percent lower.

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