Saudi minister hints oil cuts could continue

Preliminary agreement reached among some OPEC ministers to extend production cuts: Falih

Preliminary agreement reached among some OPEC ministers to extend production cuts: Falih

Oil prices tumbled Friday on renewed concerns that increasing USA production and inventory will offset leading Gulf crude producers' production cut efforts.

While inventories held at sea and in producer countries have dropped, they remain stubbornly high in consumer regions, particularly in Asia and the United States.

Oil prices flipped lower late Friday morning and into a sharp fall amid fears crude markets are entering a new downtrend. This has since reversed sharply.

Should oil prices keep falling, which looks increasingly likely, many of these companies could be pushed into bankruptcy, weighing not only on the share prices of larger energy companies but on bank stocks given concerns over loan losses.

"You would have thought that that would have reversed yesterday's fall, but it didn't", he said.

To fully determine the state of oversupply, looking at storage levels is key, but it is not easy. This marks the 14th consecutive week of US rig count increase.

There are some signs these harder-to-track inventories are easing.

"OPEC is like a magician waving his hands and trying to pull the rabbit out the hat, but still the rabbit isn't there", said Eugen Weinberg, Commerzbank's head of commodities research in Frankfurt.

But IEA data on the 35 Organisation for Economic Cooperation and Development (OECD) countries paints a more bearish picture.

"The [lack of] reaction can either be attributed to saturation, as such news is released on nearly a daily basis, or to the fact that the foremost goal of the OPEC agreement - namely to reduce the huge stocks of crude oil and oil products - is still a long way from being achieved, " Commerzbank said in a note.

Elsewhere in the energy spectrum, May gasoline tacked on 0.7% to $1.671 a gallon and May heating oil edged down by 0.2% to $1.579 a gallon.

Marzouq said there was a "noticeable increase in compliance from non-OPEC". "That's what they agreed to, not what the impact is".

OPEC want to convince markets that it's serious about curbing global supply, but doing so gives a green light to US shale producers to continue to ramp up activity.

Crude oil was selling for more than $100 a barrel in the summer of 2014 but it slid to below $30 a barrel in January 2016.

Kuwaiti Oil Minister Essam al-Marzouk said there was a "significant" commitment by producers from outside OPEC, and called for prolonging the cuts. A one-year extension would provide USA producers the certainty they need to go full-throttle, something likely to be unpalatable to the countries curbing output.

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