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UPDATE 7-Oil rises to $52 as Saudi, Russia back longer supply cut

Published 15/05/2017, 07:06 pm
© Reuters.  UPDATE 7-Oil rises to $52 as Saudi, Russia back longer supply cut
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* Saudi, Russia support supply cut extension through Q1 2018

* Volume of cuts initially to remain unchanged

* Saudi, Russia hope to involve more producers in cuts (Updates prices, previous SINGAPORE)

By Alex Lawler

LONDON, May 15 (Reuters) - Oil rose more than 2 percent on Monday to $52 a barrel after top exporter Saudi Arabia and Russia said supply cuts needed to last into 2018, a step towards keeping an OPEC-led deal to support prices in place longer than originally agreed.

Energy ministers from the two countries said on Monday that supply cuts should be extended for nine months, until March 2018. That is longer than the optional six-month extension specified in the deal. crude LCOc1 , the global benchmark, had risen $1.20 to $52.04 a barrel by 0847 GMT and traded intraday at $52.26, the highest since April 26.

U.S. crude CLc1 was up $1.18 at $49.02 a barrel.

Oil has gained support from the supply deal but inventories remain high and output from other producers such as the United States is rising, keeping prices below the $60 that Saudi Arabia would like to see.

"There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average," Saudi Energy Minister Khalid al-Falih told a briefing in Beijing alongside his Russian counterpart Alexander Novak.

"We've come to the conclusion that the agreement needs to be extended." Organization of the Petroleum Exporting Countries, Russia and other producers originally agreed to cut output by 1.8 million barrels per day in the first half of 2017, with a possible six-month extension.

The ministers said they hoped other producers would join the supply cut, which will initially be on the same volume terms as before.

Oil traders and analysts were surprised by the strong wording of the announcement.

"It is certainly a strong statement to include already 2018, while it may also be aimed at improving the chances of keeping other participants on side when it comes to the next round of talks in 10 days," analysts at JBC Energy said in a report.

OPEC and the non-OPEC countries meet to decide policy on May 25 in Vienna, and OPEC has also invited two small producers not involved in the original deal, Egypt and Turkmenistan, to attend.

However, higher output from the United States, which did not participate in the agreement to cut supplies, has limited the impact of the OPEC-led effort. C-OUT-T-EIA

U.S. energy firms added oil rigs for a 17th week in a row, extending a 12-month drilling recovery, energy services firm Baker Hughes Inc BHI.N said on Friday.

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