Russia, Saudi Arabia back extension of oil output cuts

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"There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average", Falih told a briefing in Beijing alongside Novak.

Asked why oil prices hadn't rallied further on the joint announcement, Croft said expectations for an extension were already baked into prices, and the market is now asking whether two dozen exporters will accept Saudi Arabia and Russia's proposal to keeping cutting through March 2018.

WTI Crude is now trading up 3.03 percent at $49.29 per barrel, with Brent Crude up 2.93 percent at $52.33 (1126GMT).

Russian Energy Minister Alexander Novak said the proposed extension of output cuts aimed to bring global commercial oil inventories down to the five-year average and stabilize the market.US bank Goldman Sachs said the deal would likely extend the oil price rebound "although the rally so far.has remained modest compared to the move that occurred last year when the OPEC cuts were first announced". Oman, a non-OPEC producer like Russian Federation, expressed support the same day for curbs to continue until the end of March.

OPEC members agreed in November to cut output by 1.2 million barrels a day, and several non-members, including Russian Federation, agreed in December to contribute a combined 600,000 barrels a day of reductions.

If OPEC keeps restraining production, stockpiles will fall by 1.5 million barrels a day in the second half. Together, they control around 20 million bpd in daily output, equivalent to a fifth of daily global consumption.

Following the Russia-Saudi statement, Kazakh Energy Minister Kanat Bozumbayev said "Kazakhstan should follow the trend", in comments reported by Russia's RIA Novosti agency. Oil has surrendered about half its gains since the producers' accord to cut output late a year ago.

If producers maintain their cuts at the current pace, it could push the market into a small deficit by the fourth quarter, said Edward Bell, director for commodity research at Emirates NBD in Dubai.

The EIA (U.S. Energy Information Administration) estimates that Iraq's crude oil production fell by 5,000 bpd (barrels per day) to 4.4 MMbpd (million barrels per day) in April 2017-compared to March 2017.

Oil has been struggling since a long time now to retain its value in the market after the introduction of its substitute Shell gas.

"This statement shows the commitment by Opec and major non-Opec oil producers to bringing stability to the oil market, in which is essential to have security of supply in coming years", said one of the sources.

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