An extension of OPEC-led oil production cuts into the second half of 2017 would help bring global crude inventories back to a five-year average by the end of the year and support prices at about $55 a barrel, BP's chief financial officer said Tuesday. Oil stocks have steadily built for nearly three years amid sharp production increases in the United States, Iraq, Iran, Brazil and other regions, sparking a slide in oil prices from above $100 in 2014 to $30 last year. To reduce inventories to their five-year average, the Organization of the Petroleum Exporting Countries, Russia and other producers agreed to cut output by 1.8 million barrels per day (bpd) in the first half of 2017, a deal that helped lift prices to their current level of about $52. With stockpiles still high, OPEC states have indicated those cuts could be extended to December. "If OPEC cuts roll into the second half of the year we anticipate crude oil stocks would get back into the top end of the historical range," BP Chief Financial Officer Brian Gilvary said after the company reported a jump in profit. "I wouldn't describe it as being majorly bullish, but it would certainly firm up and underpin prices from where they are today," he told Reuters. "If you look at total stocks right now, they are starting to decline." Oil stockpiles in industrialized nations were 3.055 billion barrels at the end of February, about 330 million barrels above the five-year average but with the market showing more balance, the International Energy Agency said last month. "If the OPEC cuts get rolled into the second half of the year that will underpin oil prices. If they don't get rolled into the second half of the year we will continue to see more volatility," Gilvary said. OPEC and non-OPEC states meet on May 25 to discuss whether to extend cuts for another six months after June. "From BP's perspective we're managing things around $50-55 a barrel, that's probably the range we would expect for the rest of the year," he said, adding that prices could climb to the upper end of the range around $55 if the cuts were extended. Global oil demand is expected to grow by 1.3 million barrels per day this year, he added.
