Oil prices steadied last Wednesday, April 19, after the Secretary General of OPEC reiterated the organisation’s commitment to bringing global oil inventories down.
The move followed a comment by Saudi’s Arabia Energy Minister that cast doubt on an extension to the current production cuts and contributed to a 0.5% drop in oil prices.
It had been reported a week earlier that Saudi had expressed to OPEC officials its desire to extend production cuts for an additional six months. More recently, however, the Wall Street Journal reported that the Saudi Arabia Energy Minister had said to reporters in Saudi capital Riyadh:
“It is premature to talk about extending the cut.”
At the start of this year, OPEC and its nonmember partners, which include Russia, cut production by 1.8 billion barrels a day in an effort to clear the three-year-long supply glut. While there are signs this is having the desired effect, the cuts have been offset in part by higher US oil production, which is forecast to rise by 124,000 barrels per day in May compared to April. The most notable examples of this are the increasing number of shale rigs coming online to take advantage of higher oil prices.
Higher prices are also critically important to North Sea operators like Royal Dutch Shell, which also makes industrial hydraulic oils like Shell Tellus S2 M 46. Although North Sea operators have greatly improved their efficiency in recent years, oil prices of around $50 are often cited as being necessary for the industry’s long-term profitability.