Energy and Resources Stocks zoom up with news on extension of oil output cuts

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Australian Economy

Energy and Resources Stocks like Beach Energy that charged high by about 8.6 per cent on December 01, 2017, got a boost from the latest development in the oil sector with the OPEC (Organisation of the Petroleum Exporting Countries) and non-OPEC producers led by Russia moving a step closer to reduce the puffy oil stockpiles. The producers have now agreed to extend the oil output cuts by nine months until the end of 2018. The supply is said to be cut by about 1.8 million barrels per day (bpd) for raising oil prices, and this deal expires in March. The aim is to clear up a global glut of crude and support prices to stay above $60 a barrel.

Kuwait’s oil minister has also signalled for co-operating with the non-OPEC countries till the end of 2018. On the other hand, Nigeria and Libya have been exempted from cuts owing to geopolitical situation and already low production. The combined output of Nigeria and Libya at 2017 levels was slated to be below 2.8 million bpd.

Meanwhile, Russia has also flagged the way to exit from the cuts in order to avert a situation that can cause a deficit. It has been emphasized that Russia needs much lower oil prices from the point of balancing its budget in comparison to Saudi Arabia, which is expected to benefit from high-priced crude given the stock market listing due for Aramco. It appears that the countries might exit the deal in a gradual manner in order to avoid any surprises to the market.

It is noteworthy that production cuts since the beginning of 2017 have enabled curbing the excess global oil stocks by half. However, there are also emerging concerns on increase in rig count by US producers over the next few months due to higher prices, which can reverse the anticipated scenario.

In the meantime, other key stocks in the sector surging up at the back of the news included BHP Billiton, which was up 1 .03 per cent, and Woodside Petroleum, which was up 1.2 per cent.


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