Opec, Russia signal global oil alliance may endure past 2018

But, as the price has risen, nimble US shale producers have pumped more oil.

X The cartel's forecast for USA output growth this year was revised up by 110,000 barrels per day to 820,000 bpd, as higher crude prices encourage an increase in conventional production.

"This year promises to be a record-setting one for the USA", said the Paris-based global energy watchdog in their widely anticipated monthly report.

Oil was mixed ahead of Energy Information Administration stockpile and production data after OPEC showed concern about US production in its monthly oil market report Thursday.

Over the last three months global crude prices have increased by 17 per cent. Russia's Energy Minister Alexander Novak said talks this weekend could include mechanisms for gradually exiting the supply cuts after the agreement concludes at the end of 2018, while also reaffirming its commitment to the agreement.

Crude oil prices are up almost 4 percent since the start of the year, prompting concerns that USA shale oil operators could expand their activity.

Analysts also pointed to an expected demand slowdown at the end of winter in the northern hemisphere and excessive long positions in financial oil markets as a likely brake on any upward momentum in prices. As a result of new investments, the production in the USA could reach 11 million barrels per day during the year, surpassing Saudi and Russian yields, shows the official government forecasts. Production of the fuel averaged 9.7 million bpd last week, up from 9.5 million bpd in the week to January 5.

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Falih said the global economy had strengthened while supply cuts - in which Saudi Arabia has shouldered by far the largest burden - had shrunk oil inventories around the world.

That could be enough, it said, for US production to "rival" that of Russian Federation, which has partnered with Saudi Arabia on efforts to keep oil prices high by throttling output until the end of 2018. Better to earn more dollars on less production than to go bankrupt pumping lots of oil!

Last week West Texas Intermediate (WTI) oil prices rose to $63 per barrel, up from $27 in early 2016.

Friday's fall came despite Baker Hughes weekly survey of oil rig use revealing a small fall in the number of United States oil rigs in use - down five to 747 this week, although that followed a rise of 10 rigs a week earlier.

The production cuts, introduced by OPEC and 10 non-member oil producers, have reportedly become the major price driver.

US oil prices are hovering just above $64 a barrel. Both countries, however, have agreed to ease production to push up prices. However, some analysts suggest that this could surprise on the downside with a risk of up to 500,000 barrels a day in production going down.

  • Darren Santiago