The market has gone to growth: oil for the first time in a month to break the mark of $54 per barrel

© Fotolia / alco81Добыча oil. Archival photoThe market has gone to growth: oil for the first time in a month to break the mark of $54 per barrel© Fotolia / alco81

Brent crude oil for the first time in a month exceeded $ 54 per barrel. Experts attribute this to the forthcoming negotiations between Russia and OPEC on the extension of the reduction of oil production.

According to trading at 5.49 GMT the cost of July futures for North sea petroleum mix of mark Brent grew 0.86 percent to 54.07 USD per barrel. The price of June futures for WTI crude oil also rose by 0.93 percent (50,80 USD per barrel).

The causes of market recovery

Reuters notes that the increase in oil prices due to expectations from the meeting of representatives of OPEC and Russia. It is expected that the parties will agree to extend the freeze of the production.

According to the Agency, speech can go about reduction of oil production to 1.8 million barrels per day.

At the end of November last year, OPEC agreed to cut its production by 1.2 million barrels a day. After that, a similar document was signed by eleven countries which are not included in the cartel, while Moscow pledged to cut production by 300 thousand barrels per day.

Initially the agreement was to operate only in the first half of 2017, however, the parties agreed on a possible extension.

Most countries in favour of the extension of the agreement

In the beginning of last week, a meeting of the energy Ministers of Russia and Saudi Arabia Alexander Novak and Khalid al-falikha. After negotiations, the politicians said both countries supported the renewal of the Treaty of Vienna for nine months.

While Novak did not exclude that the document can join and other countries.

«Preliminary consultations show that all committed (agreement — ed.), I see no reason why any country could go. All are now performing the agreement and I think we achieved the goal, there is a lot of sense to continue this cooperation,» said Novak.

Later the Russian Minister explained the position of Moscow.

«We believe that before the end of the year, the market may not yet be balanced, also in winter, the observed annual decrease in demand. Therefore, this period should pass. In any case, the question always arises, what will happen when longer-term forecasting to understand the balancing market is discussed together with our companies, colleagues from Saudi Arabia. And we believe that this gives greater certainty in terms of a market recovery,» said Novak reporters, answering a question that will give the market the extension of the agreement on the reduction of oil production for nine months.

On Thursday, the Minister of energy of Algeria Noureddine Bouterfa, said that most of the parties to the agreement in favour of its extension.

«I think among most countries there is a consensus to support the proposal of Russia and Saudi Arabia to extend the agreement for nine months,» said Bouterfa.

The same position held by the Minister of energy, industry and natural resources Saudi Arabia Khalid al-falih.

«We think we can all agree. Everyone with whom I spoke, made it clear that to extend the agreement for nine months — a wise decision,» said Saudi officials on Saturday, Bloomberg.

Al-falih noted that the extension of the agreement until the end of the first quarter of 2018 will reduce commercial stocks of oil and oil products in the world to five-year average.

Russian companies also support the extension of the agreement. For example, the CEO of Rosneft Igor Sechin said that the main thing now — «to have a mechanism to protect our interests».

Forecasts of experts

Some experts believe that the decision to extend the Vienna Convention does not impact dramatically on the oil market.

Analyst «Discovery Broker» Andrei Kochetkov said that not acceded to the Treaty or exclude the players were able to take advantage of the prevailing conditions and, in fact, to compensate for the decline in production in the OPEC countries and those who joined the agreements. For example, in U.S. oil production for the year increased by more than 10 percent to 9,314 million barrels, and in Libya during the year, the production doubled to 0.8 million barrels per day. In addition, the growing production in Canada and Nigeria.

«This suggests that a substantial increase of quotations will not be, as this will cause a further increase in production in the United States and several other countries, and also have a negative impact on the discipline of the parties to the Treaty on the limitation of production,» — said Kochetkov.

The market has gone to growth: oil for the first time in a month to break the mark of $54 per barrel© RIA Novosti / Maxim to Bogodeeva in fotobudka Arabia considers acceptable oil price of $40 in 2020 goduo to analysts, the growth will be restrained: prices will remain in the range of 50-55 dollars per barrel of Brent.

Analysts at JP Morgan Bank less conservative: they believe that prices may jump to $ 60. The experts warned that the growth of the oil market will spur countries outside OPEC to increase production, which will severely complicate the process of balancing market in 2018.