Oil prices rise amid talk of limiting production through 2018

Crude prices hit a three-week high above $52 a barrel today, after top producers Saudi Arabia and Russian Federation agreed to extend output cuts for a further nine months, until March 2018, opening the possibility of extending an OPEC-led deal to support prices further than expected.

"Extending the cuts for another nine months may not eliminate the glut in the market", said Sadad Al-Husseini, a former executive vice president of exploration and development at Saudi Arabian Oil Co., the state producer also known as Saudi Aramco.

"As we have seen over the past six months, rising USA production and record inventories have kept upside limited and a nine-month extension at this stage is unlikely to break that".

Brent crude, the global benchmark, had risen US$1.54 to US$52.38 a barrel by 1005 GMT (6.05 a.m. ET) and traded intraday at US$52.52, the highest since April 24. Futures for Brent crude rose by 0.29% to $51.97 per barrel, whereas WTI went up by 0.33% to $49.01 per barrel.

"We've come to the conclusion that the agreement needs to be extended", the statement said.

One month later in Vienna, 11 non-OPEC oil-producing countries, including Azerbaijan, agreed to cut oil output by 558,000 barrels per day in the first half of 2017 with the possibility of extension, the largest contribution made by non-OPEC oil producers ever.

On Monday, Russia and Saudi Arabia called for extending the output cuts ahead of an OPEC meeting on May 25.

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OPEC members agreed in November to cut 1.2 million barrels a day of oil production. While the curbs by the producers is working, "we are not where we want to be" on the initial goal of bringing global inventories down "gently" below the 5-year average, Al-Falih said.

Under the original deal, Russian Federation said it would cut average daily production by 300,000 barrels per day.

The agreement was the first of its kind in around eight years and spurred a 25pc rally in crude prices in the weeks that followed.

In recent years Saudi Arabia has been in a pitched battle with the USA to try to reduce the price of oil.

The countries with highest oil export revenues in OPEC in 2016 included Saudi Arabia at $133 billion, Iraq with $54 billion and the United Arab Emirates had $47 billion. USA crude was up US$1.48 at US$49.32 a barrel.

However, another rise in US drilling activity weighed on markets.

Global oil markets are on course to reach a supply-demand balance in 2017, the IEA said, with supply deficits expected to pick up speed in the near term. "We discussed this topic and we support this kind of proposal".

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