Russia and Saudi Arabia
Oil giants keep tap closed for the time being
Russia and Saudi Arabia will not open the oil tap any further for the time being. Russian Energy Minister Alexander Novak and his Saudi counterpart released the news on Monday, May 15. The restriction on oil production will last at least until March 2018.
These countries are by far the largest oil products in the world. Following the news, the price of crude oil rose by 15 percent on Monday 3 May to more than 52 dollars. For a further price increase, the oil tap must be closed further than is currently the case.
OPEC deal close by
In 2016, OPEC countries agreed to limit oil production until July 1. The purpose of this is to raise the price of oil. Whether that production limitation will be followed up will probably be decided on 25 May. Then the oil-producing countries come together again. With the statement from Russia and Saudi Arabia, analysts and traders expect an extension of the production limit to be close.
Small impact
To push the oil price further, OPEC countries must agree to further restrict oil production. An ING analyst told the Financieele Dagblad that an extension of the current production restriction has already been priced in. In addition, the oil price is held back by ample production of shale oil in the US.
Shale oil production is currently profitable. That means more supply. In addition, shale producers do not have to comply with the OPEC deal. Therefore, provisional calculations are made with a price below USD 50 per barrel in the second half of this year.
Wouter Job
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