In order to rein in a glut, Saudi Arabia and Russian Federation said on Monday that they agreed the need for a 1.8 million barrels per day (bpd) crude supply cut to be extended for nine months, until the end of March 2018.
Kuwait today backed a call by top oil producers Saudi Arabia and Russian Federation to extend a deal on crude production cuts for nine more months. "The two ministers agreed to do whatever it takes to achieve the desired goal of stabilising the market and reducing commercial oil inventories to their five-year average level".
Members of the Organization of Petroleum Exporting Countries agreed in November to cut 1.2 million barrels a day of oil production.
But oil at above Dollars 50 a barrel has, in turn, attracted higher-cost producers in the United States back to the market, and frantic American drilling will push non-OPEC supply throughout the year, the IEA predicted.
Meeting on the sidelines of China's One Belt One Road conference in Beijing, energy ministers from the two countries said supply cuts should be prolonged for a further nine months, ie, until March 2018, from June 2017 as originally scheduled, to rein in a global glut that is preventing prices from firming up.
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Oil prices hit a three-week high after the announcement, while shares of oil majors Exxon and Chevron were up 1 percent in premarket trading.
"The market is certainly reacting to comments from Saudi Arabia and Russia's ministers, and it should help at least maintain current prices", Will Yun, a commodities analyst at Hyundai Futures Corp., said by phone. USA oil production has risen by 10% over the previous year.
"With the United States rig count increasing for its 17th consecutive week, I think we can safely say that the crude oil battle is well and truly on", said Mr Matt Stanley, a fuel broker at Freight Investor Services in Dubai.
Analysts including Goldman Sachs have said the global oil market is re-balancing, and the International Energy Agency predicts demand will significantly exceed production if OPEC and its partners extend their cuts into the second half of the year. Some analysts said that USA production could still threaten to disrupt the market balance unless the cuts were deepened. "Get prepared for real sacrifices or we will have to say goodbye to the deal", he said. US drillers added nine rigs targeting crude, bringing the total to 712, the most since April 2015, Baker Hughes Inc. said Friday.