Oil prices soar as KSA, Russia back extension of output cut

Oil prices continue growing.

European benchmark North Sea Brent crude rose $1.54 to $52.38 a barrel by 1005 GMT (6.05 a.m. ET) and traded intraday at $52.52, the highest since April 24.

"Extending the cuts for another nine months may not eliminate the glut in the market", said Sadad Al-Husseini, a former executive vice president of exploration and development at Saudi Arabian Oil Co., the state producer also known as Saudi Aramco. The rally driven by Saudi and Russian pledges to extend output cuts lost steam as investors await US crude inventory data to be released by an industry group on Tuesday and by the government on Wednesday. The ministers called for the current deal among the Organization of the Petroleum Exporting Countries to be extended by nine months, far longer than what analysts had hoped.

Nigeria's 200,000 barrel-a-day Forcados oil pipeline is ready to export again after being shut down nearly continuously since February 2016.

Mr Falih added: "We've come to the conclusion that the agreement needs to be extended".

"I think prices will move up to $51 to $55 and in August may go to even $58", he said.

However, last year Saudi officials agreed to the first cut in production for eight years.

The oil cartel Opec, which is dominated by Saudi Arabia, and non-Opec producers led by Russian Federation have been attempting to use the output cut to drive up prices. Nymex crude oil futures prices are challenging $50 a barrel Monday morning.

Opec, Russia and other producers originally agreed to cut output by 1.8-million barrels per day in the first half of 2017, with a possible six-month extension.

"I think OPEC and Russian Federation recognize that in order to get the market back on their side they will need "shock and awe" tactics where they need to go above and beyond a simple extension of the deal", said Virendra Chauhan, Singapore-based analyst at Energy Aspects. This is required to stabilize the oil market.

According to the June nomination plans, Aramco will cut supplies by 1 million barrels each to Southeast Asia, China and South Korea, a source, who has knowledge of the nominations but did not wish to be identified, told Reuters. "Given recent USA inventory declines we can expect markets to balance in 2018 if OPEC maintains the cuts". US output has risen more than 10% since the middle of past year, and data released on Friday by oil services firm Baker Hughes showed that the number of active rigs across the country rose for the 17th week in a row.