A second Opec cut may well be in the pipeline

OPEC's coordinated effort to curtail global supply has so far managed to put a floor under oil prices, which have been sitting modestly above US$50 since the deal was announced at the end of November last year. But resurging US shale has been capping the upside, and Brent has not breached US$58 per barrel. Analysts and experts are now mostly predicting that oil prices will remain below US$60 this year.

The supply-cut deal has so far resulted in a surprisingly high Opec (Organization of the Petroleum Exporting Countries) compliance of more than 90 per cent, thanks to the cartel's leader and biggest producer, Saudi Arabia, which has been cutting deeper than pledged. But the market has already priced in this high compliance, and although oil prices jump for a few hours on every report of "extraordinary efforts" and reassurance that members will strive for "full conformity", they are stuck in a narrow band, kept in check by US shale and record high inventories in America.

A key upside driver for prices would be an extension of the Opec deal beyond its original expiry date at the end of June. Just over a month had passed since the beginning of the production cut deal when talk of extending the agreement started to intensify. Opec is said to be prepared to extend the deal, and may also increase the cuts, if inventories fail to drop to a specified level, sources from the group told Reuters.