Oil rises above $52 as Saudi Arabia, Russia back output deal extension

Oil prices jumped to the highest level in two weeks on Monday, with Brent crude climbing above $52, after oil ministers of Saudi Arabia and Russia said they favor extending the production limit deal for another nine months.

The global benchmark Brent crude was last trading up 2.4 percent at $52.08 per barrel (bbl) – the highest since April 25. WTI crude gained 2.5 percent to $48.98/bbl.

Saudi Arabia’s minister of energy Khalid Al-Falih and his Russian counterpart Alexander Novak in joint statement in Beijing said they plan to recommend to other participants in the agreement that the output deal be extended until Q1 2018.

The participating countries will be meeting in Vienna on May 25 to discuss the output deal.

“I think the decisions will be positive in Vienna. We bring together a complete consensus of the group,” Falih was quoted as saying by Russia’s state news agency TASS.

“Our nations agreed to extend the deal up to the end of March 2018 with the same volume of allocations, which was included in the agreement from December 10,” he added.

According to Falih, the Kingdom supports extending the agreement between the Organization of Petroleum Exporting Countries (OPEC) and non-member producers.

Novak said the Russian oil companies also have agreed on maintaining the production limit for another nine months, TASS reported.

“Before discussing extending the agreement with my colleague from Saudi Arabia, we discussed our position with our companies. This is our common consolidated position,” Novak was quoted as saying.

OPEC and non-OPEC oil producers last year agreed to reduce output by 1.8 million barrels per day for six months, starting January 1.

Oil prices had surged to cross the $55-mark following the agreement earlier this year, but fell back to $50-level on reports of rising US production.

Analysts have been expecting that the output deal will be extended at the May 25 meeting in Vienna.

“If carried through the proposed cuts will have a significant impact in terms of curbing the world’s supply and demand imbalance and may even begin to erode the huge inventory overhang, which will have a much bigger impact in terms of supporting oil prices,” Emirates NBD said in note on Monday.

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com