OPEC ponders supply cut extension

Last November, major oil producers agreed to cut output as a response to the global supply glut that had been pushing down prices for nearly two years.

The West's energy watchdog, the International Energy Agency (IEA), has said oil market rebalancing was on the way and foresaw a significant drop in stock from current record levels of 3 billion barrels in the next few months.

However, the budget is not fixed since Congress has the final say and has rejected many White House proposals in the past.

Brent for July settlement fell 7 cents to $53.80 a barrel on the London-based ICE Futures Europe exchange, and traded at a $2.71 premium to WTI.

Certain oil producing countries pledged to reduce combined output by 1.8 million bpd to combat global oversupply for the first six months of the year.

Saudi energy minister Khalid al-Falih paid a rare visit to Iraq on Monday in the latest effort by the top oil producer to convince its fellow Opec member to extend supply cuts for a further nine months to ease the global glut and prop up prices.

The U.S. has more leeway to release the SPR crude as its own production C-OUT-T-EIA has surged 49 percent over the past five years.

Pradhan acknowledged that OPEC's production cuts are an attempt to stem the crude price slide, but said he was anxious that it could result in under-investment in the energy sector and push prices up in the long run.

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Iraq, where oil revenues make up almost 95 percent of the budget, has been reeling under an economic crisis since 2014, when oil prices began plummeting from a high of over $100 a barrel.

The price of a barrel of Azeri Light crude oil increased $0.47 to stand at $54.72 on the world markets.

Some analysts have stated that the United States no longer needs a large supply since the flow in domestic production brought about by shale oil output over the past decade and the cut down in the country's import of crude oil.

OPEC, led by Saudi Arabia, and other participating producers will meet on May 25 to discuss extending the period of the cut from covering just the first half of this year to all of 2017 and the first quarter of 2018. "All I talked to from inside OPEC are supporting the nine months of cuts".

Iran, OPEC's third-largest producer and a political rival of Saudi Arabia, hasn't yet publicly backed a nine-month extension, but Oil Minister Bijan Namdar Zanganeh said on May 6 that he will go along with whatever decision the rest of the group makes.

Saudi Arabia and Russian Federation, the biggest of the 24 producers in the accord - and which don't get on in other areas either - agreed last week that it should be extended until March.

"We need to give the market some more time", and the U.A.E.is open to prolonging the agreement for six or nine months, he said on sidelines of conference in Abu Dhabi on Tuesday.

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