Russia, Saudi Arabia back extension of oil output cuts

Saudi Arabia and Russian Federation, the world's two top oil producers, said on Monday they favor extending oil output cuts for a further nine months until March 2018 to hold back a global crude glut, pushing up prices.

The energy ministers of OPEC kingpin Saudi Arabia and its biggest non-OPEC partner Russian Federation met Monday and agreed to do "whatever it takes to achieve the desired goal of stabilizing the market", Russia's energy ministry said in a statement.

Global benchmark Brent crude was up $US1.24 at $US52.08 a barrel by 1.40pm in NY, having touched $US52.63, the highest since April 21.

The decision for extending the oil production cut was mutually agreed upon by the two major oil producing countries and all the active members of the OPEC. "We've come to conclusion that the agreement needs to be extended".

The ministers said they hoped other producers would join the supply cut, which will initially be on the same volume terms as before.

The cuts were agreed by OPEC in November of last year and represented the first agreement of its kind in eight years, in an attempt to curb the oil rout caused by excessive oversupply.

The Saudi-Russia announcement on Monday will probably extend a price rebound that began last week, though the rally is "modest" compared to the increase when OPEC cuts were first agreed to late past year, Goldman Sachs analysts said in a report.

OPEC meets on May 25 in Vienna to discuss the cuts, Oil Prices will be looking to that meeting.

The feature in the marketplace early this week is a continuation of the recent rally in the crude oil market.

USA drilling activity last week rose to its highest in two years, while us production has jumped more than 10 percent since its mid-2016 trough. Economists forecast that job creation bounced back last month after a disappointing March, in the latest sign of U.S. economic strength supporting the Fed's plans for more interest rate increases this year.

USA crude stockpiles are forecast to have declined by 2.75 million barrels to 519.8 million barrels in the week ended May 12th, according to a Bloomberg survey of analysts.

EOG Resources (EOG) said it could increase production by 18% while operating within cash flow if oil averages $47 per barrel this year.

Analysts including Goldman Sachs have said the global oil market is re-balancing, and the International Energy Agency predicts demand will significantly exceed production if OPEC and its partners extend their cuts into the second half of the year.

"We never say that our goal is a price".

If producers maintain their cuts at the current pace, it could push the market into a small deficit by the fourth quarter, said Edward Bell, director of commodity research at Emirates NBD in Dubai.

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