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By Rania El Gamal and Alex Lawler
DUBAI/LONDON (Reuters) - OPEC oil producers increasingly favour extending beyond June a pact on reducing crude supply to balance the market, sources within the group said, although Russia and other non-members need to remain part of the initiative.
The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from Jan. 1 for six months, the first reduction in eight years. Russia and other non-OPEC producers agreed to cut half as much.
The deal has lifted oil prices, but inventories in industrial nations are rising and higher returns have encouraged U.S. companies to pump more. A growing number of OPEC officials believe it may take longer than six months to reduce stocks.
The group wants stocks in the industrialised world to fall to the average of the past five years. According to the most recent data, for January, inventories of crude and refined products stood 278 million barrels above this level.
"The ministers will meet in May to decide, but everyone has to be on board," an OPEC source from a major producer said.
"Hard negotiations are on the way," another one of the sources said.
Russia, the largest of the 11 outside producers working with OPEC, has not publicly said whether it supports extending the supply cut, but is wary about the revival of U.S. shale output due to higher oil prices.
"It's too early to know whether everyone will agree to this," a source from a non-OPEC participant in the deal said, referring to prolonging the output curb.
OPEC ministers and sources, however, have said they don't see a large rebound in 2017. One OPEC source said shale production was expected to grow by about 300,000 bpd this year - a level the market could accommodate.
"OPEC heavyweights such as Saudi Arabia are not happy with the return of shale oil in full force and have to make a hard choice between losing part of their market share or steady income," said a source from a major non-Gulf OPEC producer.
"They will more likely opt for income and will push to get help from non-OPEC."
(Editing by Dale Hudson)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)