Oil prices steady as Saudi Arabia's energy minister hints at an extension to Opec's production cuts

 
Courtney Goldsmith
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Renewed confidence that Opec will extend its production cuts has bolstered oil (Source: Getty)

Crude oil prices have stabilised as an extension to the Organisation of the Petroleum Exporting Countries' (Opec) deal looks increasingly likely.

However, despite extending gains that began Friday, the price of global benchmark Brent crude is still hovering below $50 a barrel.

Brent was trading 0.49 per cent higher at $49.34 per barrel while West Texas Intermediate (WTI) prices were 0.61 per cent higher at $46.50 per barrel at the time of publishing.

"Both Brent and US benchmarks have failed to overcome key support turned resistance levels as $50 and $47 respectively. Investors will once again be on the lookout for any further commentary from Opec that an extension of its six-month production cut," said analysts at Accendo Markets.

What will Opec decide?

Saudi Arabia's energy minister, Khalid Al-Falih, today said oil markets are rebalancing after years of oversupply, but he still expects the cartel to extend its deal to cut production for another six months from June.

"Based on consultations that I've had with participating members, I am confident the agreement will be extended into the second half of the year," Al-Falih said during an industry event in Malaysia, according to Reuters.

Rising shale production in the US has spurred fears that Opec's cuts aren't doing enough to reduce the global supply glut. Opec will decide whether to extend the deal among members and non-members to cut output by 1.8m barrels per day at a meeting on 25 May.

Alexander Novak, Russia's energy minister, also backed extending the output cuts today, according to Reuters. "Russia expresses its full solidarity with the efforts of our partners aimed at rebalancing the global oil market and believes that joint efforts to date have been very effective," Novak said.

"We are discussing a number of scenarios and believe extension for a longer period will help speed up market rebalancing."

Industry sources told Reuters Opec and non-member producers are even considering extending the supply cut for nine months or more.

However, investors should prepare for the unexpected when it comes to Opec meetings, said Jameel Ahmad, FXTM vice president of market research.

​"Basically what this could come down to is whether Opec and non-Opec members are willing to lose face by accepting defeat to shale in return for a further boost in revenue, or are they committed to prolonging their participation in this ongoing production war with shale?" Ahmad said.

Read more: 2017 will be another year of low oil discoveries after they plunged in 2016

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