Sean Seshadri

Crude futures surge 3.3% after Saudis pledge to lower exports – Sean Seshadri

Crude futures settled higher on Tuesday, as investors continued to cheer Saudi Arabia’s pledge to lower crude exports and Opec’s commitment to boost compliance with output cuts to curb excess supplies.

On the New York Mercantile Exchange crude futures for August delivery rose 3.3% to settle at $47.89 a barrel, while on London’s Intercontinental Exchange, Brent added 2.92% to trade at $50.02 a barrel.

At a gathering of ministers from major crude-producing nations in St. Petersburg, Russia on Monday, Saudi Energy Minister Khalid al-Falih said his country would limit crude oil exports at 6.6 million barrels per day (bpd) in August, almost 1 million bpd below levels a year ago.

The Saudi energy minster added that the production-cut agreement could be extended beyond March if necessary but any further extension would rely on non-compliant nations adhering to the agreement.

Opec’s compliance rate – with the deal to curb production –fell to 78% June, the IEA said in its report earlier this month.

Russian Energy Minister Alexander Novak said an additional 200,000 bpd of oil could be removed from the market if there is 100% compliance with the OPEC-led deal.

Despite the somewhat positive outcome of the meeting, Opec has its work cut out to curb excess supplies and lower crude stockpiles to the five-year average, which is the target level for Opec and non-Opec members.

Opec said that stocks held by industrial nations had fallen by 90 million barrels in the first six months of the year but were still 250 million barrels above the five-year average.

The rally in crude prices comes ahead of a fresh batch of inventory data from the Energy Information Administration (EIA) expected to show that U.S. crude stockpiles fell for a fourth-straight week.

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Oil gains after Saudi vows to cap crude exports next month – Sean Seshadri

Oil rose on Monday, erasing early losses after leading OPEC producer Saudi Arabia pledged to cut its exports to help speed the rebalancing of global supply and demand.

Saudi Energy Minister Khalid al-Falih said his country would limit crude oil exports at 6.6 million barrels per day (bpd) in August, almost 1 million bpd below levels a year ago.

Brent September crude futures (LCOc1) were up 44 cents on the day at $48.50 a barrel by 1313 GMT, having risen from a session low of $47.68.

NYMEX crude for September delivery (CLc1) rose 39 cents to $46.16.

“This is the Saudis saying they view the current market conditions as too weak and they are actually delivering,” said SEB commodity strategist Bjarne Schieldrop.

“It shows real additional willingness on their part to do something, which is hugely important, rather than sitting back and letting OPEC motions roll forward. They’re acting unilaterally and adding pressure.”

Falih also said the Organization of the Petroleum Exporting Countries and non-OPEC partners were committed to extending their existing 1.8 million bpd supply reduction deal beyond next March if necessary but would demand that any non-compliant nations stick to the agreement.

OPEC and some of its competitors met in the Russian city of St Petersburg to review market conditions and examine proposals related to their pact to cut output.

There was no discussion of deeper oil output cuts, but Falih said that Nigeria, which is exempt from the deal, had signaled it was ready to cap its output at about 1.8 million bpd.

Nigeria and Libya have been exempt from the cuts as they recover from years of unrest.

“Al-Falih is striking an optimistic tone today by also saying ‘it is only a matter of time before inventories return to five-year average’, the question for the market is how long?,” BNP Paribas (PA:BNPP) head of commodity strategy Harry Tchilinguirian told the Reuters Global Oil Forum.

“With patience already being tested, a slow rebalancing of the market is unlikely to invite strong buying interest and could lead to the early unraveling of potential summer price gains.”

OPEC and some non-OPEC states, including Russia, agreed to cut production by 1.8 million bpd from January 2017 to the end of March 2018.

Russian Energy Minister Alexander Novak said the deal had helped to clear 350 million barrels of additional supply from the market so far this year.