LONDON (Reuters) - Oil edged up on Friday after OPEC and
other major producers agreed to continue reining in output until the end of
next year to try to reduce the
global oil glut and boost prices.
The Organization of the Petroleum Exporting Countries and
some non-OPEC producers led by Russia agreed on Thursday to keep current limits
on output in place until the end of next year, although they signaled a
possible early exit from the deal should the market overheat and prices rise
too far.
Brent was trading at $63.17 by 1351 GMT, up 54 cents on the
day. U.S. light crude was up 43 cents at $57.82.
“OPEC and the cooperating countries have created a very high
level of confidence that they are standing behind the oil market, that they’re
going to drive the inventories further down,” SEB Markets chief commodities
analyst Bjarne Schieldrop said.
“They gave a very serious and trustworthy appearance
yesterday and that is taking away a lot of the downside in the market,” he
said.
The deal, which has been in place since January and was due
to expire in March, has seen producers reduce output by 1.8 million barrels per
day (bpd), helping to halve global oil oversupply over the past year.
It has allowed prices to return above $60 per barrel,
recovering from lows of $27 per barrel hit in January 2016.
But the price rise has also revived the specter of the bull
market of the last decade when Brent prices soared.
A oil pump is seen at sunset outside Scheibenhard, near
Strasbourg, France, October 6, 2017 . REUTERS/Christian Hartmann
These concerns led Russia to stress the need for clarity on
an exit strategy from the deal and to this end, a reference to a review process
in June was included.
“Without the reference to a June review, Russia would have
been tied to the end of 2018; it wanted instead to have an escape clause,”
Petromatrix strategist Olivier Jakob said.
“It leaves a question mark about the second half [of 2018]
and about the commitment of Russian oil companies, which will be price
dependent,” he said.
The CEO of Russia’s top private producer Lukoil told Reuters
he would like to see the price of oil stable at current levels, trading in the
$60-65 per barrel range.
The oil market is unlikely to overheat, he added, thanks to cooperation
between OPEC and its allies which would allow them to release new output into
the market to rebalance it.
Price rises could also fuel more drilling in the United
States, which is not party to the agreement, Russia warned.
Rising U.S. production has been a thorn in OPEC’s side,
undermining the impact of its output curbs.
U.S. oil production hit a new record of 9.68 million bpd last
week, according to government data released this week. [EIA/S]
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