Price of oil above $52 as Saudis and Russians Support longer supply cut

It has being reported that the price of crude oil has hit its highest point in more than three weeks on Monday, topping $52 per barrel after Saudi Arabia and Russia said the supply cuts by the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members should last till 2018.

Energy ministers from the two countries said on Monday that supply cuts should be prolonged for nine months, until March 2018.
That is longer than the optional six-month extension specified in the OPEC-led deal.
Saudi, the de facto leader of OPEC, and Russia, the world’s biggest producer, together control a fifth of global oil supply.
Their latest joint action was spurred by oil prices dropping to under $50 per barrel, below their budget needs.
Following the position of the two major producers, the global benchmark Brent crude was up $1.45 at $52.29 a barrel Monday afternoon, after touching $52.63, the highest since April 21.
U.S. crude, West Texas Intermediate (WTI), also rose by $1.46 to $49.30.
Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak said in a statement that they would “do whatever it takes” to reduce the inventory overhang, using a phrase coined by European Central Bank President Mario Draghi five years ago in his successful bid to defend the euro.
“There has been a marked reduction to the inventories, but we’re not where we want to be in reaching the five-year average,” Falih told a briefing in Beijing alongside Novak.
“We have come to the conclusion that the agreement needs to be extended,” he added.
The briefing took place as Russian President Vladimir Putin was in Beijing on an official visit.
Putin said he had recently met with the biggest Russian oil firms and they backed a nine-month extension.
“I feel optimistic because our main partner in this process, and our main partner without doubt is Saudi Arabia, has fully implemented all the agreements that took place up to now, and secondly, Saudi Arabia wants to maintain stable and fair prices for oil,” Putin said.
Reuters reported that oil traders were surprised by the strong wording of the announcement, though it remained to be seen whether all countries participating in the deal would agree with the Saudi-Russian stance.
OPEC, Russia and other producers originally agreed to cut output by 1.8 million barrels per day in the first half of 2017, with a possible six-month extension.
Oil has gained support from the deal but inventories remain high and rising output from other producers, such as the United States, is keeping prices below the $60 that top exporter Saudi Arabia would like.
The ministers said they hoped other producers would join the cut, which would initially be on the same volume terms as before.
Kazakhstan, however, said it could not join a prolonged reduction on the same old terms.
Ministers from OPEC and non-OPEC countries will meet to decide the policy on May 25 in Vienna.
Two small producers not involved in the original deal — Egypt and Turkmenistan — have also been invited.
In the domestic scene, oil workers under the aegis of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) on Mondays attempted to escalate the week-long picketing of Mobil Producing Unlimited, an affiliate of ExxonMobil, to other international oil companies (IOCs) by directing its members in Chevron to stop work in solidarity with their colleagues at ExxonMobil.
The senior oil workers also on Monday engaged Neconde Energy, a sister company of Nestoil and subsidiary of Obijackson Group, in a marathon meeting after picketing the company, in protest against unpaid transfer allowances to staff who were transferred from Lagos to Warri.
PENGASSAN did not, however, sustain the action in Chevron as normal activities resumed in both the company and ExxonMobil, after the union leaders left before 1 p.m.
Also, unlike the action taken in ExxonMobil where PENGASSAN sealed off the head office to prevent workers from gaining access to their offices, the workers did not shut the gate of Chevron, as other categories of staff who are not members of PENGASSAN went about their normal activities during the few hours that the action lasted.
Addressing workers at the corporate head office of Obijackson in Lagos, the Lagos Zonal Chairman of PENGASAN, Mr. Abel Agarin, accused the company of not providing sufficient accommodation and transfer allowances for staff who were transferred from Lagos to Warri in Delta State.

“It is the situation PENGASSAN finds itself. The past two weeks have been critical to us. It has been a trying period for PENGASSAN, all our members are being intimidated by one management or the other. It started from ExxonMobil and trickled down to Neconde,” he said.
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