OPEC-led output cuts much closer to be extended

Alright… finally some good news for those oil bulls. This week has started with a joint statement from Saudi Arabia Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak saying they are committed to “do whatever it takes” to fight crude supply overhang.
Wanna guess? Yeap… In other words, they are saying Saudi Arabia and Russia are going to fall for the extension of the OPEC-led output cuts agreement.
As it’s no surprise, comments from ministers came in only a week ahead of the next meeting from the Organization of the Petroleum Exporting Countries in Vienna. On May 25, members of the oil cartel will vote whether to extend or not the deal signed last November.
However, this time it’s not for a six-month length, but for a nine-month period. As you heard it. The extension is set to last until March 2018, which is seen as a clear intend to rebalance supply levels, turn the game back to traditional producers and ultimately, prompt up prices.
Initially, the deal contemplated a 1.8 million barrels cut from global crude oil output, which accounts for nearly 2 percent of the world’s production. While most OPEC members jumped in, there were some exceptions made for countries such as Iran.
Last year, the Arabian country said it couldn’t afford to cut production as they had only entered the oil market briefly after lifting sanctions imposed over its nuclear weapons program.
“There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average, [...] we've come to the conclusion that the agreement needs to be extended,” said Falih on Monday.
According to Neil Atkinson, head of oil analysis at the International Energy Agency, the oil cartel and Russia have succeeded in fighting oversupply levels, which have been pressuring prices in the last few years.
Speaking at the Platts Crude Oil Summit in London last week, Atkinson said that the oil market could move into deficit if the OPEC deal is extended later this year.
“If you were to take the IEA’s oil report and look at estimates of what OPEC might do — it might rollover the existing levels — and assume no changes to the demand and supply outlook, you will find that as we move to the second half of the year it is likely that the surplus in demand and supply will grow,”
Energy ministers met on the sidelines of an international cooperation meeting hosted by China. Russian president Vladimir Putin, who attended to that conference, said extending oil production cuts was the right thing to do in order to keep prices steady.
“I met behind closed doors all the leaders of our biggest oil and gas companies, along with the energy minister. We discussed this theme, and we supported such a proposal,” said Putin.
There are no doubts Russia and Saudi Arabia have serious interest on passing the deal. Economy and politics are just the upper part of it. But remaining countries that should take part on the agreement have still significant power to turn things to other side.