Oil prices posted a surge of around 2% on Friday last week with global benchmark Brent crude turning above the $60 level thanks in large part due to Saudi Crown Prince Sheikh Mohammed bin Salman who intended to extend an OPEC-led deal to reduce production.
Despite the U.S. shale mining growth, late-October marked a new record high of oil prices in more than two years because a report showed that the Organization of the Petroleum Exporting Countries (OPEC) along with Russia and nine other producers have reduced their production by 1.8 million barrels per day to decrease the supply glut. This project was planned to remain until March 2018, but now the producers tended to extend it, according to an interview with the Saudi Crown Prince.
“A solid global demand backdrop coupled with Opec-led cuts is eating into the oil glut,” said Stephen Brennock at PVM oil brokerage in London. “Commercial oil inventories are trending lower and the surplus above the five-year average has been halved to around 160m barrels since the start of the year. Injecting a further dose of bullish impetus is the constant stream of price-supportive comments from Opec officials.”
The better news was that Russian President Vladimir Putin also had the same standpoint.
OPEC's Secretary General Mohammad Barkindo commented on Friday that the OPEC was happy to see the obvious indication from the Crown Prince of Saudi Arabia since it’s a need to stabilize oil markets. "Together with the statement expressed by President Putin this clears the fog on the way to Vienna on Nov. 30,” he added.
Valery Polovsky, an analyst of Forex Club, appraised that Moscow and Riyadh finally seemed to reach a full understanding of the issue, and as a result, the term of the oil pact starting with a 6-month period now was stretched into a 24-month one.
Meanwhile, Bogdan Zvarich, a senior analyst at IK Freedom Finance, judged that Brent crude towering above $60 would lead to the activation of shale production in the US. He also added that the new output level “will stimulate the defrosting of deposits with a higher production cost, which again will increase supply in the market.”
Right after the announcement from Sheikh Mohammed bin Salman, the international oil benchmark in the European trading session approached $60.53 per barrel, making a gain of 36% from the lowest level of 2017 - $45 a barrel.