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LONDON, March 28 Major oil traders gathered in
Switzerland this week said they expected OPEC and non-OPEC
producers to extend their pact to curb output in the second half
of this year, providing Russia complies.
"I think the surprise so far this year is how quickly shale
came back on a relatively modest price rebound," Gunvor CEO
Torbjorn Tornqvist told a panel at the FT Commodities Global
Summit in Lausanne.
An unexpectedly quick return of U.S. shale production since
OPEC and non-OPEC producers agreed in December to limit oil
production has put the brakes on a rebounding oil price. After
rallying to above $55 a barrel after the December agreement,
crude is now trading at around $51 a barrel.
"Will the agreement hold? By and large, yes. I think the
rewards have been there, they (the cuts) put a floor to the
market," said Tornqvist.
A committee of ministers from OPEC and non-OPEC members said
on Sunday that it had agreed to review whether the global pact
to limit supplies should be extended by six months.
The upturn in shale output has also prompted OPEC to engage
U.S. producers in talks about how best to tame the global oil
glut, although Tornqvist said he did not expect the pace of
recovery in shale production to be sustained.
Russell Hardy, Vitol's chief executive for Europe, Middle
East and Africa, said he expected OPEC and non-OPEC members to
extend their pact as the market's cushion of 300 million barrels
in stocks has been slow to erode. However, he said it would
depend on the oil price at the time of the next OPEC meeting,
scheduled for May 25.
"At $50 per barrel there's a lot of incentive to continue
the policy, at $60 per barrel, no. It'll depend on how
fundamentals exert themselves in the second quarter," Hardy
OPEC's decision will also hinge on whether Russia follows
through on its promise to cut production by 300,000 barrel per
day by April. While the push for non-OPEC cuts was led by
Russian President Vladimir Putin, the producer has been slow to
"Russian compliance hasn't been 100 percent," Marco Dunand,
CEO of Mercuria, said. "I think a lot of the onus is on Russia
to show that they are serious about this. If Russia comes to the
fold with non-OPEC then we'll see a floor of $60 per barrel."
(Reporting By Julia Payne; Editing by Susan Fenton)