Global oil prices extended gains for a third consecutive session Friday, pulling U.S. crude out of bear market territory, amid suggestions from Saudi Arabia's powerful energy minister that both OPEC and Russia are prepared to extend production cuts well into the second half of the year.
Speaking at an investment forum in St. Petersburg, Saudi Energy Minister Khalid al-Falih said he was 'aligned' with Russia on oil market views and noted the Kingdom was producing crude at a rate that is around 700,000 barrels per day below its target. He also said prices in the range of $60 per barrel wouldn't induce investment, adding it was foolish to boost production to compensate for the recent market declines.
Brent crude contracts for August delivery, the new global benchmark, were seen $1.12 higher from from their Thursday close in New York and changing hands at $62.79 per barrel following al-Falihs' remarks in St. Petersburg, while WTI contracts for the July were marked 94 cents higher at $53.49 per barrel.
Al-Falih's comments followed remarks from Russian President Vladimir Putin yesterday which echoed the Kingdom's concern for falling prices and weakening demand, but pegged a $40 per barrel target as one that would allow his country's budget, which is heavily reliant on oil revenues, to balance. That's more than half of the $80 to $85 per barrel price the International Monetary Fund says is need to keep Saudi Arabia's books in line.
The difference in outlooks could lead to a fracture in the current production cut agreement between OPEC members and Russia, currently taking more than 1.2 million barrels from the market each day, which is set to expire later this month.
OPEC leaders, as well as Russia's Energy Minister Alexander Novak, are expected to meet in late June or early July in Vienna to discuss the extension of that pact, which President Trump has sharply criticized over the past few months for driving up prices.
However, global oil prices have actually fallen more than 20% between late April and early June, pulling both Brent and WTI contracts into so-called bear market territory, thanks in part to both slowing world demand and a surge in U.S. production.
The Energy Information Agency said earlier this week that U.S. drillers are pumping oil a record pace of 12.4 million barrels per day, the highest in the world. That has swelled domestic stockpiles by 6.8 million barrels last week -- the biggest gain since 1990 -- and lifted overall inventories to their highest level in two years.