Iraq agrees to extension of oil cut: minister

"Clearly there is positive momentum in the oil market as it is continuing to price the OPEC deal", said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen.

The Minister of State for Petroleum and Natural Gas, Dharmendra Pradhan, has recently visited Vienna to co-chair the 2nd India-OPEC Institutional Dialogue held at the OPEC headquarters in Austria.

Iraq and Iran were the main stumbling blocks for OPEC in reaching its last output-cutting decision in December.

Saudi Arabia is now desperate to raise oil prices, which have plunged from more than $100 a barrel in 2014 to around $50 today.

Last week, Saudi Arabia and non-OPEC member Russian Federation came to an understanding on the need to extend the current deal on cuts which ends in June until March 2018.

De facto OPEC boss Saudi Arabia favors a nine-month extension, while the Iraqis had preferred to roll over current policy only for the remainder of 2017, the Dow Jones sources said. The supply reductions were initially meant to last six months from January, but the slower-than-expected decline in surplus fuel inventories prompted the group to consider an extension.

Some analysts have stated that the usa no longer needs a large supply since the flow in domestic production brought about by shale oil output over the past decade and the cut down in the country's import of crude oil. Data from the U.S. Energy Information Administration indicate that maintaining the curbs into the first quarter of 2018 would bring stockpiles back in line with the five-year average - OPEC's stated goal. "If the need arises for any correction, this can be done in coming ministerial conferences", the first OPEC delegate said.

While OPEC has had some success reducing the oil glut, somewhat higher prices are helping its biggest foe: the shale industry.

India on Monday once again asked the Organisation of Petroleum Exporting Countries (OPEC) to end charging premium from its buyers from Asia and said that the producers would not subsidise other buyers at the expense of nations like India. This gathering will then be followed by the joint meeting of the cartel ministers and other producers participating in the six-month production cuts.

"I doubt Iraq will cut any more in the second half than it has already", said Robin Mills, the Dubai-based chief executive officer of consultant Qamar Energy.

Brent crude dropped 0.5% to $53.61/bbl in London. "Its strategy of incentivising Western markets (with lower official selling prices) in the past did not result in retaining those markets", the minister said. Prices rose 5.5 percent last week.

"We have one of the most (if not the most) aggressive 2017-18 Permian production growth forecasts.but we don't think it will be sufficient to oversupply the oil market in the near future", he said.

  • Jon Douglas