Oil prices set to rise as major producers mop up supply glut

Javier Stokes
September 24, 2017

OPEC members, together with other top producers such as Russian Federation, agreed to reduce the oversupply in the market by cutting 1.2 million barrels per day of oil production.

The minister noted that although Nigeria was not a member of the five-nation Joint Ministerial Monitoring Committee, he had gladly accepted the invitation of the co-chairs of the committee and the OPEC conference president to attend its meeting.

Last May, Opec and non-Opec members agreed to extend production cuts for a period of nine months until March, but stuck to production cuts of 1.8 million bpd agreed in November a year ago.

At the OPEC meeting in Vienna, Minister of State for Petroleum Resources, Mr Ibe Kachikwu, who led Nigeria's delegation to the meeting, had argued that although Nigeria's production recovery efforts have made some appreciable progress since October previous year, Nigeria was not yet out of the woods.

OPEC and its allies have agreed to reduce production by about 1.8 million barrels per day up to March 2018 in an effort to reduce global supply surplus.

Brent for November settlement was at $56.48 a barrel on the London-based ICE Futures Europe exchange, 5 cents higher. Still, predictions of strong growth in USA shale production next year mean there are still concerns that the scheduled expiry of the agreement at the end of March could be premature. The deal is set to end in March of next year.

Kuwait's minister said there were a "number of positives" in the market. Nigeria, which is now exempt from making cuts, reiterated that it would accept a cap once output stabilizes around 1.8 million barrels a day.

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At its meeting which held in Vienna, Austria, the Committee approved Nigeria's exemption extension, stating that it should be sustained until the country's oil production stabilises.

"Since our last meeting in July, the oil market has markedly improved", Kuwaiti Oil Minister Essam al-Marzouq said in an opening speech at the meeting.

Still, CHS Hedging's Headrick said "the USA oil producer has proven to be very resilient in the face of lower prices".

"The focus of the energy market is decidedly on Vienna right now as oil heavyweights from around the world gather for the meeting" Friday", said Tyler Richey, co-editor of the Sevens Report.

Crude inventories rose by 1.4 million barrels in the week to September 15 to 470.3 million, compared with expectations for an increase of 3.5 million barrels.

In addition, rising crude prices have encouraged USA shale oil producers to ramp up output, a further reason why the drawdown on global inventories has taken longer than expected.

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