Oil prices surge as Saudi seeks more supply cuts

Iraq says OPEC & allies may extend oil output curb to 1.6 million bpd

Oil steadied on Tuesday, as expectations of output cuts from OPEC and allied producers brought prices back up after they slid briefly following comments from U.S. President Donald Trump that a trade deal with China may be delayed.

American benchmark West Texas Intermediate (WTI) was trading at $56.16 a barrel at the same time for a 0.2% increase after it ended the previous session at $56.03 per barrel. The contract rose 1.4 percent to close at $55.96 on Monday.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russian Federation, known as OPEC+, are expected to at least extend existing output cuts to June 2020 when they meet this week.

Business a.m learnt that OPEC and its allies are in talks to further increase the existing supply cut of 1.2 million barrels per day (bpd) by 4,000 bpd with an extension till June 2020.

OPEC oil output fell in November as Angolan production slipped due to maintenance and Saudi Arabia kept a lid on supply to support prices before the initial public offering of state-owned Saudi Aramco, a Reuters survey found.

Further, the same belief is endorsed by the USA banking giant Goldman Sachs, as it says that "we believe the global oil supply-demand balance requires an extension of the current OPEC+ cuts". Trump said he was willing to wait another year to sign a trade deal with China.

The investment bank said it expected Brent to trade around $60 a barrel in 2020, "absent new growth or geopolitical shocks".

"(The) oil price is little moved today, suggesting that traders are skeptical about the additional 400,000 BPD cut on top of the extension of (the) current production cut agreement", said Margaret Yang, market analyst at CMC Markets in Singapore.

OPEC's ministers will meet in Vienna on December 5 and the wider OPEC+ group will meet on December 6.

But U.S. production keeps rising, filling the gaps left by OPEC, with output in September increasing to a new record of 12.46 million barrels per day (bpd), the U.S. government said in a monthly report on Friday. Output from the Organization of Petroleum Exporting Countries slipped by 110,000 barrels a day last month, according to data compiled by Bloomberg, while analysts forecast United States crude fell last week for the first time since mid-October.

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