Economy

Oil rises nearly 3% as Saudi signals OPEC deal extension, stocks rally

Oil rises nearly 3% as Saudi signals OPEC deal extension, stocks rally”

These depressed prices are good news for consumers, but bad for Opec's petrodollar economies led by Saudi Arabia, which wants the group and its allies to extend production cuts at least until the end of the year.

Oil prices rose almost 3% on Friday, climbing further from five-month lows hit this week, after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June and as Wall Street rallied.

Saudi Energy Minister Khalid al-Falih also said OPEC was close to agreeing to extend a pact on cutting oil supplies beyond June, although more talks were still needed with non-OPEC countries that were part of the production deal.

Speaking at an economic forum in St Petersburg, Russia, Al-Falih said that flawless stability on the oil market had not been achieved and the market was being influenced by factors outside "our" control.

"On the OPEC side, a rollover is nearly in the bag. I'm hoping it will be an easy decision and that we'll roll over, but if it's not, we will be flexible in terms of our position". But they have fallen from a peak above $75 in April to below $62 a barrel on concerns about demand due to a U.S.

If risk aversion increases, there would be pressure on economic growth, says an analyst from the Singapore Eastport brokerage firm.

Crude prices have fallen more than 20% from the 2019-high ($66.60) as the USA imposes a 5% tariff on all goods coming from Mexico, and the current environment may keep oil under pressure as President Donald Trump pledges to implement "monthly increases as per schedule".

Saudi Arabia has cut supply by more than required by the OPEC+ deal in a bid to stop inventories building up.

Research firm Rystad Energy has raised its forecast for USA crude output by 200,000 barrels bpd, to 13.4 million bpd by the December 2019, it said in a statement on its website.

President Vladimir Putin said on Thursday that Russian Federation had differences with OPEC over what constituted a fair price for oil, but that Moscow would take a joint decision on output at a policy meeting in coming weeks.

Brent and WTI on Wednesday hit their lowest marks since mid-January at $59.45 and $50.60, respectively, after USA crude output reached a record high and stockpiles climbed to their highest since July 2017.

"I think demand is rather healthy", he said. Physical demand is very good.

"After prices hit the depth of the sewer this week, and (were) arguably in oversold territory, traders were always going to be predisposed to book profits ahead of the weekend", Stephen Innes, managing partner at Vanguard Markets said in a note.



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