OPEC panel to conclude meeting on Friday

OPEC panel to conclude meeting on Friday

Oil futures rose in early trading on Friday on growing optimism that big producing countries will extend output cuts to curb a persistent glut in crude, with key benchmarks heading for a second week of gains.

Earlier, Saudi Arabia and Russian Federation made a joint statement, saying during the OPEC meeting to be held May 24-25, they will propose the extension of the output cut deal by nine months.

An OPEC panel reviewing scenarios for the oil producer group's meeting next week is looking at the option of deepening and extending a deal to reduce crude output, OPEC sources said on Friday, in an attempt to drain inventories and support prices.

As of 08:18 (MSK) the prices of July futures for Brent oil increased by 0.78% to $52.92 per dollar on the ICE Exchange in London.

"I think the cuts are enough to stabilise the market".

In recent years Saudi Arabia, concerned with the increase in US shale gas production, increased its oil output to drive down prices in a bid to make shale gas exploration economically unattractive.

"Oil markets...[are] never exactly balanced", but for now, the market is "moving from an oversupply situation to some sort of balance", he said-and a six-month extension to the output-cut deal will feed a drawdown in global supplies.

Benchmark Brent and West Texas Intermediate crude futures rallied by a dollar or almost 2% on the day of the news, but were unable to sustain an upward momentum. U.S. benchmark crude oil was up 61c at $49.96 a barrel. But in terms of whether this will be sustained-that would depend on "adherence to the supply cuts" and global demand expectations, as well as factors outside of OPEC's control, including USA production, he said.

"On the one hand, you have traders who worry about the efficacy of OPEC's oil cuts on inventory levels". As no one is counting on US crude production growth being arrested in its tracks or a "demand shock" mopping up the world's surplus, a sizable, measurable and sustained draw in global oil stocks is the obvious answer. Overall production from non-OPEC members, including about a dozen that are party to the multilateral production arrangement, is expected to grow by 600,000 barrels per day this year.