Saudi, Kuwait signal likely extension of oil output cut

Preliminary agreement reached among some OPEC ministers to extend production cuts: Falih

"We are once again seeing the emerging stalemate between OPEC and non-OPEC cutting efforts on one side and rising USA production on the other", said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. Joint talks with non-OPEC oil ministers will also take place that day, two sources said.

While a number of producing nations have reached an initial deal to extend supply curbs past June, according to Saudi Arabia's energy minister, data showing rising USA output is prompting concern that those reductions will be undermined.

The oil market is gearing up for the OPEC end of May gathering with two meetings planned on the day.

The price of Brent crude has increased since OPEC and non-OPEC members agreed to reduce output, and it now trades at $53.05, after selling for as low as $27.

"Our global crude balance shows implied stock draws in July and August even in the event of a halt to the cuts", said Eugene Lindell, senior oil analyst at JCB Energy consultants in Vienna. A month ago, the comparable CFD traded at just minus 50 cents barrel.

Crude futures +1% to $50.92.

Eleven non-OPEC countries - Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan - agreed to reduce the oil output.

WTI crude oil, the U.S. benchmark, is down by 1.5% at $49.96 per barrel, while Brent crude oil, the global benchmark, is down by 1.2% at $52.34 per barrel as of 11:02 a.m. ET.

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USA output has jumped nearly 10 per cent since mid-2016 to 9.25 million bpd, close to that of the world's top two producers, Saudi Arabia and Russian Federation.

Markets overall were looking for evidence that inventories had been drawn down before being more confident surrounding the outlook for prices.

Iran's crude oil exports are set to hit a 14-month low in May, suggesting the country is struggling to raise exports after clearing out stocks stored on tankers. His Kuwaiti counterpart, Essam al-Marzouq, said he expected the agreement to be extended.

Oil ministers met in Abu Dhabi at the bi-annual GCC Petroleum Media Forum and told reporters that a preliminary agreement was in place to extend the production cuts until the market finds a rebalance.

Saudi Arabian Energy Minister Khalid al-Falih said on Thursday there is "an initial agreement" among producers that they may need to prolong the measures because stockpiles remain too high.

Gasoline futures recently fell 1.2% to $1.65 a gallon and diesel futures fell 1.8% to $1.5502 a gallon.

This was primarily attributed to excessive stockpiles and refinery maintenance season, which in the USA led to a string of seven-figure inventories increases, making markets nervous.

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