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Oil Surges After Saudis, Russians Agree To 9 Month OPEC Output Cut Extension; US Futures Flat

zerohedge.com / by Tyler Durden / May 15, 2017 6:44 AM

In an otherwise quiet session in which European shares dropped, Asian equities rose and S&P500 futures were little changed, crude oil surged above $49 on high volume, after the Saudi and Russian energy ministers said in Beijing they favor extending the OPEC production cut for 9 months, though the end of Q1 2018.

WTI rose more than 3%, rising above the 50DMA, climbing to the highest intraday price in almost two weeks after the comments, with subsequent comments by Putin pushing crude to session highs, and Brent above both its 200 and 50 DMA.

While output curbs that started Jan. 1 are supposedly working according to the Saudi and Russian energy ministers – clearly debatable considering there has barely been any reduction in the record global inventory glut during the first 4 months of the OPEC production cut – global inventories aren’t yet at the level targeted by OPEC and its allies, Saudi Energy Minister Khalid Al-Falih said in Beijing alongside his Russian counterpart, Alexander Novak.

“The agreement needs to be extended as we will not reach the desired inventory level by end of June,” Saudi Arabian minister Khalid Al-Falih said at event with Russian counterpart Alexander Novak. “Therefore we came to the conclusion that ending will probably be better by the end of first quarter 2018”

The ministers agreed the deal should be extended through the first quarter of 2018 at the same volume of reductions, which however according to many analysts won’t be enough to decidedly lower inventories considering the recent rebound in Libya and Nigeria production as well as a the near-record production out of the US. For now, however, it was enough to send oil surging wiping out more than 2 weeks of losses.

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