Oil, USD: Where To Target Oil & EUR/USD After OPEC Supply Cut - Danske

OPEC and key producers including Russian Federation agreed Thursday to extend curbs on oil output to the end of March 2018.

Oil prices rose by one percent ahead of an OPEC meeting on Thursday that is expected to extend output cuts into 2018, adding at least nine months to an initial six-month cut in the first half of this year.

Yesterday, brent crude oil fell more than 1pc to around $53 per barrel as markets were disappointed Opec would not deepen the cuts or extend them by as long as 12 months. U.S. companies then took advantage of the high prices, learning to produce huge quantities of oil from shale rock in a process called hydraulic fracturing, or fracking. The U.S. benchmark for crude was down $2.25 a barrel at $49.11.

Analysts argue oil prices will only rise if every OPEC's nation follows the policy to reduce oil production, but countries such as Venezuela ignored their pledges.

OPEC comments may have also bolstered expectations that major producers would strike a more dramatic deal, even though few cartel officials publicly predicted any of those things were likely to come to pass.

"There have been suggestions (of deeper cuts), many member countries have indicated flexibility but ... that won't be necessary", Saudi Energy Minister Khalid al-Falih said before a meeting announcing the decision. "Inventories are drawing down", he told reporters.

Bord Gáis Energy energy trader Darragh Crowley said the move will lift prices, though not as much as the Opec members want.

More than 400 oil rigs are now working USA shale fields - an increase of more than 120 per cent compared with a year ago.

OPEC oil ministers were continuing their discussions in Vienna after three hours of talks.

Commerzbank cited data from the U.S. Department of Energy saying U.S. production was roughly 540,000 barrels per day higher in mid-May than at the start of the year. Too rapid a growth risks "potentially oversupplying the market and revisiting 2014" - a reference to the year when crude prices hit levels south of $40 a barrel. Non-OPEC exporters are also expected to participate in the cutback.

The first agreement to cut production was achieved last December during an OPEC summit in Vienna.

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