Oil gains as Saudi Arabia stands by OPEC cuts, US drilling drops

Published: March 11, 2019
Email
Saudi energy minister says it will be too early to change production curb pact. PHOTO: REUTERS

Saudi energy minister says it will be too early to change production curb pact. PHOTO: REUTERS

LONDON: Oil prices rose on Monday, lifted by comments from Saudi Energy Minister Khalid al-Falih that an end to OPEC-led supply cuts was unlikely before June and a report showing a fall in US drilling activity.

US West Texas Intermediate (WTI) crude oil futures were at $56.42 per barrel at 1200 GMT, up $0.35, or 0.62%, from their last close. Brent crude futures were at $66.17 per barrel, up $0.43, or 0.65%.

Falih told Reuters on Sunday it would be too early to change a production curb pact agreed by the Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russia before the group’s meeting in June.

ExxonMobil suspends offshore drilling near Karachi coast

“We will see what happens by April, if there is any unforeseen disruption somewhere else, but barring this I think we will just be kicking the can forward,” Falih said.

Oil markets have been supported this year by ongoing supply cuts by the group called OPEC+, which has pledged to cut 1.2 million barrels per day (bpd) in crude supply since the start of the year to tighten markets and prop up prices.

The group will meet on April 17-18, with another gathering scheduled for June 25-26, to discuss supply policy.

A Saudi official also said on Monday that the country plans to cut crude oil exports in April to below 7 million bpd.

Prices were also buoyed by US energy services firm Baker Hughes’ latest weekly report showing the number of rigs drilling for new oil production in the United States fell by nine to 834.

Oil drops 2% as global economic outlook weakens

But the Paris-based International Energy Agency predicted a surge in US production, which would see its exports exceed Russia’s and near Saudi Arabia’s by 2024.

“The second wave of the US shale revolution is coming,” the IEA’s Fatih Birol said. “It will see the United States account for 70% of the rise in global oil production … with profound implications for the geopolitics of energy.”

Markets were held back after US employment data raised concerns that an economic slowdown in Asia and Europe was spilling into the US.

“Brent prices have struggled to push firmly above $65 per barrel in part because a strong US dollar remains a major headwind for commodity prices. In addition, global GDP growth has been soft and oil demand has yet to pick up seasonally,” Bank of America Merrill Lynch said in a report on Monday.

But citing the OPEC+ cuts and low global stocks, the bank predicted prices for Brent would reach $70 a barrel this year.

Facebook Conversations

More in Business