Oil rallies 2% as Saudi promises to cut exports
LONDON (Reuters) — Oil rose by more than 2% on Tuesday after Saudi Arabia vowed to reduce exports from next month and OPEC called on members to boost compliance with agreed output cuts to help curb oversupply and support flagging crude prices.
Brent crude futures rose $1.01 to $49.64 a barrel by 1342 GMT. U.S. West Texas Intermediate futures also rose by $1.01 to $47.35 a barrel.
At a meeting in the Russian city of St. Petersburg on Monday, the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers discussed extending their deal to cut output by 1.8 MMbpd beyond March 2018, if necessary.
Saudi Energy Minister Khalid al-Falih said that his country would limit its crude exports to 6.6 MMbpd in August, almost 1 MMbpd lower than the same month a year earlier.
"But the most concrete indication coming out of the meeting was that Nigeria would agree to implement production adjustments," Vienna-based consultancy JBC Energy said.
Nigeria voluntarily agreed to join the deal by capping or cutting its output from 1.8 MMbpd once it stabilizes at that level.
But in a sign that production from the OPEC member remains susceptible to disruptions, Royal Dutch Shell's Nigerian subsidiary said on Monday it had shut its 180,000 bpd Trans Niger pipeline because of a leak on July 21.
Ministers at the meeting also highlighted the importance of compliance.
Russian Energy Minister Alexander Novak said an additional 200,000 bpd of oil could be removed from the market if there were 100% compliance with the OPEC-led deal.
OPEC said stocks held by industrial nations had fallen by 90 MMbbl in the first six months of the year but were still 250 MMbbl above the five-year average, which is the target level for OPEC and non-OPEC members.
"In our view ... these meetings were aimed at saving face and diverting the market's attention away from Iraq's poor compliance, shale's resilience and Libya's and Nigeria's markedly higher output," Barclays said.
Prices were also supported by a warning from Halliburton's executive chairman that growth in North America's rig count was "showing signs of plateauing", representing a possible threat to continued increases in US shale oil production.
China's crude imports will exceed 400 MMt (8 MMbpd) this year and are likely to grow by a double-digit percentage next year, a Sinopec Group executive said.
Reporting by Ahmad Ghaddar; Additional reporting by Osamu Tsukimori in Tokyo; editing by Alexander Smith and David Clarke
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