On Thursday, oil prices increased as indications that Saudi Arabia and Russia would limit production through next year offsetting high U.S. exports and resuming production at a Libyan oilfield.
“Bullish comments from the Russian and Saudi Energy ministers are helping arrest the recent decline in oil prices,” stated Stephen Brennock, an analyst.
Brent crude increased by 70 cents at $56.50 a barrel and U.S. light crude increased 40 cents at $50.38. Both crude levels have dropped over 5 percent during the last week as investors retained profits after three months of gains.
This week, Russian President Vladimir Putin stated that a agreement by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to decrease oil output to increase prices can extend to the end of 2018. Russian Energy Minister Alexander Novak stated that Moscow will back new countries joining the agreement.
The statement came as Saudi Arabia’s King Salman visited Moscow. “Putin and Salman will most likely reach, but not announce, an agreement to extend the OPEC/non-OPEC production deal, though with a commitment to taper the cuts,” said Eurasia Group.
In January the agreememt to cut output by about 1.8 million barrels per day (bpd) took effect. Other influences have affected on oil prices, including the resume of production of Libya’s Sharara oilfield. Higher U.S. oil exports also diminished the markets outlook.
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Last week, U.S. crude oil exports climbed to 1.98 million bpd, surpassing the 1.5 million bpd record from the week before. Broadening the discount for U.S. crude against Brent made U.S. oil more attractive to world markets later followed.
Analysts at Barclays believe future oil demand could be weakened by improving fuel efficiency and the increase of electric vehicles (EV). “EV uptake and increased fleet fuel-efficiency could cut oil demand by around 3.5 million bpd in 2025,” according to the bank.