Oil Prices Rise As Saudi Arabia And Russia Reach Deal on Output Cut

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Oil prices rose Wednesday as Saudi Arabia and Russia reportedly reached a deal on output cuts while weekly U.S. supply data delivered another surprise.

The cartel won’t hold an early meeting Thursday as proposed by Algeria, and its originally scheduled meeting for next week could also be in jeopardy unless all members meet production cut quotas, a source told Bloomberg.

De facto OPEC leader Saudi Arabia and Russia, who typically lags in output cuts, are pushing for the quotas to be met and cracking down on cheaters. Iraq and Nigeria are behind on their output cuts, and both said late Tuesday that they would better comply with current quotas.

But sources told Reuters the Saudi Arabia and Russia have agreed to extend current production cuts by a month.

Under the current agreement decided in April, OPEC+ agreed to cut 9.7 million barrels per day (bpd) in May and June, its deepest cut agreement ever. The group would then ease its cuts to 7.7 million bpd from July to December, and 5.8 million bpd from Jan. 1, 2021 until April 30, 2022.

Riyadh reportedly had pushed for the 9.7-million-bpd cuts to continue through the end of the year.

U.S. oil prices rose 1.3% to settle at $37.29 per barrel. Brent oil prices gained 0.6% to $39.80 per barrel.

Exxon Mobil (XOM) shares jumped 4.1% on the stock market today. Chevron (CVX) climbed 2.6%. Among top U.S. shale producers, EOG Resources (EOG) added 1%, and Pioneer Natural Resources (PXD) rallied 4.8%

U.S. Oil Stockpiles, Production

The Energy Information Administration reported U.S. crude stockpiles fell by 2.1 million barrels vs. the prior week. Gasoline supplies grew by 2.8 million barrels.

U.S. crude  production fell to 11.2 million barrels per day from 11.4 million in the prior week, and down from a high of 13.1 million in March.

Analysts polled by S&P Global Platts saw a 3.5 million-barrel increase in crude stockpiles and a 300,000-barrel drop in gasoline supplies.

The latest data continued a string of unexpected twists. Last week saw a surprise crude stockpile increase, while the prior two weeks saw unexpected declines.

Late Tuesday, the American Petroleum Institute recorded a 483,000-barrel drop in crude stockpiles and a 1.7 million barrel increase in domestic gasoline supplies.

Gasoline and oil prices are expected to rise in the coming weeks as coronavirus related restrictions are eased.

— Investors Business daily

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