Global Oil Prices Jump on Talk of Extending Production Cuts

People watch a South Korean TV news broacast showing file footage of a North Korean missile launch at a railway station in Seoul

Oil prices increased on Monday after major producers Russian Federation and Saudi Arabia said that they are willing to support extending oil production cuts into the first quarter of 2018.

"But now with rising demand and a commitment by Russian Federation and Saudi Arabia to extend cuts, we could see the recent 5 week drop in USA oil inventories continue for the foreseeable future", he wrote in his daily Energy Report newsletter.

Oil has gained support from the deal but inventories remain high and rising output from other producers, such as the United States, is keeping prices below the $60 that top exporter Saudi Arabia would like.The ministers said they hoped other producers would join the cut, which would initially be on the same volume terms as before.

"Rhetoric is doing its job but this must be backed by action in less than two weeks' time". OPEC ministers plan to meet on May 25 to decide whether to extend cuts in their production beyond June.

World oil prices jumped on Monday, with US crude futures trading 3% firmer at more than $49 a barrel.

Resilient Asian stocks edged up to a two-year high on Monday, shaking off threats from by a ransomware attack that locked some 200,000 computers in more than 150 countries at the weekend, a missile test by North Korea, and weak US data. Investors seemed to mostly shrug off fears from a successful missile test by North Korea and a cyberattack that disrupted operations at vehicle factories, hospitals, shops and schools.

Goldman sees US crude oil at ~$55/bbl at the end of 2017 and Brent at $57.

Two of the three major indexes in Wall Street closed at record-high levels as oil prices increased on Monday.

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"At this level, there isn't too big a correlation between oil and equities but since we've seen oil fall quite a bit in a month or so, today's rally in oil is helping the market grind higher", said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 percent.

Japan's Nikkei narrowed losses to 0.15 percent.

Oil futures jumped as the ministers spoke.

People are reflected in a display (top) showing the current exchange rate between USA dollar and Japanese Yen outside a brokerage in Tokyo, Japan, November 7, 2016.

The dollar index, which tracks the greenback against a basket of major trade-weighted peers, was little changed at 99.219. The Kospi of South Korea climbed 0.2 percent to 2,290.65. A jubilant leader Kim Jong Un promised more nuclear and missile tests and warned that North Korean weapons could strike the US mainland and Pacific holdings.

Earlier this year in London, Sanalla had projected that output could reach 1.25 million barrels per day by the end of 2017 and 1.6 million barrels per day by 2022. BP (BP) added 1.3%.

Factory output growth rose 6.5 percent in April from a year ago, while fixed-asset investment grew 8.9 percent in the first four months of the year, both missing analyst expectations.

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