Saudis See Extended Cuts Enough to Drain Stocks

Saudi Arabia's energy minister said on Sunday that extending the current agreement on global oil supply cuts until March next year, and adding one or two small producers to the pact, should be enough to reduce oil inventories.

"We believe that continuation with the same level of cuts, plus eventually adding one or two small producers ... will be more than adequate to bring the five-year balance to where they need to be by the end of the first quarter 2018," Khalid al-Falih told a news conference in Riyadh, Reuters reported.

OPEC's aim is to reduce global oil inventories to the industry's five-year average.

The Organization of Petroleum Exporting Countries, Russia and other producers originally agreed to cut production by 1.8 million barrels per day for six months from Jan. 1.

Oil prices have gained support from reduced output, but high inventories and rising supply from producers not participating in the accord, such as the United States, have limited the rally, pressing the case for extending the curbs.

Saudi Arabia and non-OPEC member Russia, the world's top two oil producers, have agreed on the need to prolong the current deal on cuts, which expires in June, until March 2018.

An OPEC panel reviewing scenarios for the oil producer group's meeting last week looked at the option of deepening and extending the agreement to reduce crude output, in an attempt to drain inventories and support prices.

The panel, the Economic Commission Board (ECB), does not set policy and its meeting precedes the gathering of OPEC and non-OPEC oil ministers on May 25 to decide whether to extend beyond June 30 their deal to reduce output.

The size of the extra supply cut being mulled by the ECB was not immediately available.

Qatar's energy minister also said on Saturday he was optimistic that extending the cuts beyond June would improve market stability.

"We are optimistic that the extension of the agreement to the second half of this year will improve market stability, due to the higher expected demand in Q3 and Q4. This is further supported by the fact that the world economic situation is progressively improving," Mohammad al-Sada said in a statement.