Saudi Arabia and Russia, the world's two top oil producers, have agreed on the need to extend oil output cuts for a further nine months until March 2018 to rein in a global crude glut, pushing up prices. As David Pollard reports, the news sent oil prices to a three-week high.
Crude prices jumped around a per cent and a half on a joint agreement from the world's top two producers. The strength of the wording taking markets by surprise ... As non-OPEC Russia and OPEC's de facto leader, Saudi Arabia, pledged to do 'whatever it takes' to reduce a global glut. (SOUNDBITE) (English ) SAUDI ARABIA'S ENERGY MINISTER, KHALID AL-FALIH, SAYING: "We will not reach the desired inventory level by end of June and therefore we also came to the conclusion that ending will probably be better at the end of the first quarter of 2018." That confirming a desire to extend the current supply cut deal among major producers by another nine months until March of next year. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "For their part certainly, Saudi Arabia and Russia are trying to lead the way in with an OPEC meeting due towards the end of next week. They will be hoping of course that other OPEC members follow suit in terms of restricting that supply." At just under 50 dollars, crude prices have gained about 50 per cent over the last sixteen months - but are still half what they were three years ago. The current deal pledges producers to cut supplies by almost 1.8 million barrels per day. That, say analysts, may need to increase - and export cuts may be required - if supplies are to go down to target levels. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "Needless to say there they believe that in terms of continuing to stabilize the price this kind of restriction on supply remains necessary. The elephant in the room of course remains the US. shale producers who continue to ramp up production there." US shale production has risen more than 10 per cent since a mid 2016 trough. Drilling activity there last week was at its highest level in two years.