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Crude Oil Jumps as Saudi Arabia & Russia Want to Extend Production Cuts

May 15, 2017 at 17:05 by Vladimir Vyun

The big news of the day was the announcement from the energy ministers of Saudi Arabia and Russia that they are willing to extend production cuts for another nine months in order for the market to rebalance itself. Considering that Saudi Arabia and Russia are the biggest producers among 24 OPEC and non-OPEC participants in the output cut deal, that is a very strong signal. Markets welcomed the news, and that led to a rally of not just crude oil, but also stocks and commodity currencies.

Not all members of the deal were ready to join, though. For example, Kazakhstan signaled that it is not going to agree on the extension automatically and wants to discuss its level of participation in the extended deal during the meeting on May 25. Additionally, concerns remain that keeping production at the current levels will not be enough to erase global glut as US producers ramp up their output.

Contract for delivery of WTI crude oil in June climbed 2.74% to $49.15 per barrel as of 16:58 GMT on NYMEX today. July Brent crude jumped as much as 2.52% to $52.12 per barrel on ICE. Futures for both grades of oil were up more than 3% intraday before giving up some of their gains.

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