Russia, OPEC Said To Be Nearing New Oil Pact (USO)


Bloomberg explains that a year ago, Russian Federation signed an agreement with the OPEC agreement to reduce oil production, which is likely to prolong, reached a preliminary agreement.

Moreover, people involved in the matter told Bloomberg that OPEC and Russian Federation have crafted the outline of a deal to extend their oil production cuts to the end of next year, and that Moscow and Riyadh agree they should announce an additional period of cuts on November 30.

U.S. West Texas Intermediate (WTI) crude futures dipped 0.42% to $58.70 a barrel.

PVM Oil Associates strategist Tamas Varga told Reuters the oil spill that shut the Keystone pipeline was supporting USA crude, flipping prices into backwardation, when front-month prices rise above those for future months, indicating an undersupplied market.

According to Bloomberg report, David Lennox, a commodity analyst at Fat Prophets in Sydney said "it's likely we'll see an extension of the OPEC-led cuts". Shale oil represents only a fraction of global production and “is not an enemy to OPEC, ” he told reporters in Abu Dhabi, referring to the USA deposits that contributed to a worldwide glut.

Benchmark Brent crude has gained 12 percent this year and ended London trading on Friday at $63.86 a barrel, up 31 cents.

The investment bank said it expected a six- or even nine-month extension of production cuts - but added that the level of production cuts would be more significant than the duration.

Global crude inventories are declining and supply and demand are in balance, according to the head of Saudi Aramco , while the United Arab Emirates energy minister said US shale oil doesn't threaten OPEC's efforts to support the market.

Crude prices were further supported by growing signals that the Organization of Petroleum Exporting Countries (OPEC) and its allies will agree to prolong supply curbs when producers meet in Vienna at the end of the month.

Saudi Arabia accepted "a big hit" to its production and is reducing output by nearly 0.5 million barrels per day.

The OPEC-led production cuts have been one of the key catalyst supporting the recent rally in oil prices amid expectations that rebalancing in crude markets is well underway.



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