Azernews.Az

By Sara Israfilbayova

World oil prices are changing without a single dynamics on February 20 after Saudi Arabia decided to cut production at the end of last week, although the U.S. continues to increase it.

Brent crude, the global benchmark, fell 0.7 percent to $65.24 a barrel on London’s Intercontinental Exchange, West Texas Intermediate (WTI) futures were trading up 0.8 percent at $62.19 a barrel, according to the Wall Street Journal.

Oil prices stabilize and gradually recover after a sharp fall at the beginning of the month. Part of this is due to the decision of Saudi Arabia to reduce production in the next month by 100,000 barrels per day in comparison with February and export in March not more than 7 million barrels per day.

Saudi Arabia increased production in January by 23,300 barrels a day to 9.977 million barrels a day, according to the latest data of the Organization of the Petroleum Exporting Countries (OPEC), published last week. This figure is still below the quota of Saudi Arabia at 10.058 million barrels per day.

Another factor, holding back world oil prices, is the increase in oil production in the U.S.

The U.S., which surpassed Saudi Arabia in terms of oil production, ranked 2nd in the world, increased production by more than 20 percent from mid-2016 to more than 10 million barrels a day. This provides downward pressure on prices, while the growth of the world economy and Saudi Arabia’s attempts to reduce supply in the world oil market prevent a significant fall in oil prices.

At the same time, the demand for oil in China continues to grow, and the International Energy Agency has raised its forecast for oil demand this year by 7.7 percent and now expects it to grow by 1.4 million barrels a day.

Meanwhile, the United Arab Emirates’ energy minister told Reuters that OPEC and non-OPEC oil producers, including Russia, will discuss extending their cooperation for many more years when they meet in June as they seek to avoid major market shocks.

“We look forward to put something to the ministers hopefully the next time we see the whole group getting together.. hopefully in June,” he said.

He noted it was too early to say how cooperation will work exactly and whether oil production management would be maintained, adding that market monitoring was the bare minimum the group would do to help avoid gluts or shortages.

Last month, Khalid al-Falih, Saudi Arabian energy minister, OPEC’s de-facto leader, said global oil producers are in agreement that they should continue cooperating on production after their deal on supply cuts expires at the end of this year.

OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

Non-OPEC oil producers such as Azerbaijan, Bahrain, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan agreed to reduce output by 558,000 barrels per day starting from January 1, 2017.

OPEC and its partners decided to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

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