OPEC and non-OPEC nations poised to extend output cuts


Possible surprises could include a deepening of the cuts, but this would likely be minor because the non-OPEC producers that are expected to join the accord for the first time on Thursday, such as Turkmenistan and Egypt, are fairly small.

European stocks are broadly flat on Thursday morning as market participants brace themselves for the latest meeting of the oil producers cartel, OPEC.

OPEC's de facto leader, Saudi Arabia, favors extending the output curbs by nine months rather than the initially planned six months, as it seeks to speed up market rebalancing and prevent oil prices from sliding back below $50 per barrel.

OPEC countries and other producers including oil giant Russian Federation are backing prolonging last year's production cut to shore up crude prices, strongly indicating that an extension is a done deal even before they meet formally on the issue Thursday. But it also spurred growth in the United States shale industry, which is not participating in the output deal, thus slowing the market's rebalancing.

After leaving a meeting with the Saudis Algerian oil minister Noureddine Boutarfa said global producers were focusing on a nine month extension.

Asked whether deeper cuts would be discussed, he said: "Not at this point, I don't think so".

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OPEC and non-member oil producers moved closer on May 24 to clinching a deal on extending output cuts by nine months.

Gasoline and distillates also dipped, but gasoline inventories fell by only 787,000 barrels, compared with expectations for a 1.2 million barrel draw. Kuwait's oil minister, Essam al-Marzouq, said, "We agree on the need to do whatever is necessary to restore balance to the oil market".

OPEC's cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of which rely heavily on energy revenues and have had to burn through foreign-currency reserves to plug holes in their budgets.

"This is a demonstration of the commitment of participating countries to continue their cooperation until the achievement of the goal of rebalancing the market", OPEC secretariat said in a statement.

"Despite a supply cut extension being factored in by the market, oil prices have made only modest progress".

Early in the session oil prices fell following news of a White House plan to sell half the 688 million-barrel USA oil stockpile from 2018 to 2027.

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June West Texas Intermediate futures crude rose 34 cents, or 0.7%, to settle at $US51.47 a barrel in NY, but late dipped back under the $US51 level in electronic trading.

Saudi's Falih said on Monday he expected the new deal to be similar to the old one, "with minor changes".

OPEC oil ministers were continuing their discussions in Vienna.

"This seems quite a tall order", Goldman's analysts admit, "but it is important to note that this was how OPEC proceeded during the 1990s, with steady production growth, decent compliance with output quotas and a persistent backwardation outside recession".

Saudi Oil Minister Khalid A. Al-Falih spoke of a "9-month straight" extension going into Thursday's meeting.

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