Russia hints that OPEC’s output cut could be extended again

Sefa Karacan | Anadolu Agency | Getty Images

Russia’s Energy Minister Alexander Novak said the oil market is likely to move into balance by the first quarter of 2018.

The deal has so far led to a pullback of around 1.2 million barrels per day (bpd) of production generated by OPEC members and around an additional half of that figure again by non-OPEC participants. However, compliance has been weakening according to monitors at the International Energy Agency, who claim that OPEC members’ levels of compliance slipped to their poorest in six months in June as several countries elected to produce beyond the agreed limits.

Brent oil was trading 0.29 percent higher at $52.50 per barrel at 9:50 a.m. London time on Tuesday while WTI was over a percent higher at $47.79. Since the original agreement was announced last November, Brent has gained around 6 percent while WTI has moved 13 percent higher.

In addition to the effects of the agreement, increasing output from U.S. shale producers and a measured recovery in global demand have also been key influences pulling and pushing on the oil market over that period.

In the past week, prices have been supported by the supply hit caused by Hurricane Harvey in the U.S. as well as mounting geopolitical tensions – a factor which should keep bolstering the market should the situation with North Korea continue to degenerate, according to Goldman Sachs’s Michele Della Vigna.

“Typically any sign of political disruption, political tension, should actually have a positive impact on Brent – because currently we live in a period of still healthy spare capacity, that political premium is likely to be more reduced,” Della Vigna, co-head of European equity research at the U.S. investment bank, told CNBC on Monday.

“I think any sign of global instability overall should be supportive for the oil price.”