Four reasons why weakness in oil prices won't last long

Four reasons why weakness in oil prices won't last long

Brent crude futures were at US$49.48 per barrel at 0652 GMT, up 38 USA cents, or 0.75%, from their last close.

Oil prices gave up early gains on Monday, as the market weighed news from OPEC and other producers about prolonging output cuts against data showing the recovery in USA drilling had extended for a year.

Global oil prices spiked higher in early European trading Monday after comments from Saudi Arabia's Oil Minister raised the prospect of an extension of OPEC's agreed production cuts into the second half of the year. USA light crude was also little moved at $46.28 a barrel, down from a intra-day high of $46.98.

"Based on consultations that I've had with participating members, I am confident the agreement will be extended into the second half of the year", said Al-Falih, Saudi Minister of Energy, Industry and Mineral Resources, during an industry event in Malaysia's capital Kuala Lumpur on Monday.

Saudi and other officials from the Organization of the Petroleum Exporting Countries have been dropping increasingly strong hints in recent weeks that an extension was likely, even while they tried to keep their options open.

The Organization of the Petroleum Exporting Countries and other producers including Russian Federation pledged to cut output by 1.8 million barrels per day during the first half of this year to prop up the oil market.

Tyson Fury has delivered the ultimate insult to Anthony Joshua
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OPEC's subsequent agreement with non-OPEC producers made this explicit by stating output would be cut from January 1 for six months with the option to extend the curbs for a further six months.

'Third, US oil production growth has, quite rightly, been a major concern for the market over the past year or so, ' says the consulting company.

United States drilling continued to pick up last week, with the rig count climbing by 6 to 703.

USA crude output averaged 9.3 million bpd in the week ended April 28, its highest since August 2015, according to federal data and many analysts see US crude output heading towards 10 million bpd over the next year or so.

However, with hedge funds turning bearish and oil prices giving up most of their post-agreement gains last week, the need for a clearer signal has become urgent.

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