Despite the fact that oil at $80 or $100 could backfire on both global supply and demand, with US shale soaring further and demand growth possibly slowing down, analysts see the shortest-term higher budget revenues as the rationale for Saudi Arabia and the cartel to want oil prices so high. They have extended the pact until December 2018 and meet in June to review policy. The group's goal of reducing global stockpiles to their five-year average is almost reached, according to people with knowledge of the data. Rocket attacks by rebels in Yemen on top oil exporter Saudi Arabia have also contributed to oil's geopolitical risk premium. According to sources, Saudi Arabia is quite comfortable with the price hike as it is seeking no changes in the supply cut deal. "I would not be surprised if Saudi Arabia wanted oil at $100 until this IPO is out of the way".
Oil prices rose to their highest level since late 2014 after government data indicated US crude stockpiles fell last week and as the market continued to worry about supply disruptions in key oil producing nations.
"Look at the economic reforms and projects they want to do, and the war in Yemen". "They're happy to see inventories continue to go down, to see prices of $70 or $80".
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Mr Tran pointed to the "wealth disparity" among Opec members such as Venezuela and Nigeria which required a much higher breakeven price for oil on a fiscal basis, necessitating cuts to remain in place for much of the year. According to analysts, OPEC (Saudi Arabia) and Russian Federation look determined to continue with the cuts at least until their official expiry date at the end of 2018, despite the fact that their official target-bring OECD oil stocks down to their five-year average-could be achieved any moment now.
But guidance on preferred price levels comes from officials speaking off the record, and from industry sources who have discussed the issue with Saudi officials. At first OPEC fought America's emerging dominance by overproducing and thus driving down the price of oil.
Japan's Nikkei faded late in the day to end up 0.15 per cent, but basic materials and utilities both climbed more than 2 per cent. The next OPEC meeting is scheduled on June 22.
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By OPEC's parameters, the deal has worked.
Crude inventories dropped by 1.1 million barrels as a result of a decline of 1.3 million barrels per day in net crude imports. More than 830,000 front-month contracts changed hands on CME Group's New York Mercantile Exchange on Thursday, compared with a daily average of about 615,000.
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After the technical meeting, a ministerial panel of OPEC and non-OPEC producers called the JMMC gathers in Jeddah on Friday.