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Moody's China downgrade rattles Asian stocks, Aussie dollar

Chinese stocks fell and the Australian dollar skidded on Wednesday after Moody's downgraded its sovereign credit rating on China, adding to worries about the global impact of slowing growth and rising debt in Asia's economic powerhouse.

Shares elsewhere in Asia also slipped, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.3 percent, despite modest gains on Wall Street overnight.

Financial spreadbetter CMC Markets expected Britain's FTSE 100 to open slightly higher, Germany's DAX to start the day little changed, and France's CAC 40 to edge lower.

Japan's Nikkei stock index managed to end 0.7 percent higher.

"At the end of the day, overseas investors had been taking a cautious stance toward China, even before this, so it was not entirely surprising to the street," said Kyoya Okazawa, head of global markets, Japan at BNP Paribas (PA:BNPP) Securities in Tokyo.

The move would likely have only a short-term market impact, he said.

The Australian dollar, regarded as a proxy for China due to the country's status as a major trading partner, was down 0.4 percent at $0.7450 after falling as low as $0.7439 after the Moody's announcement.

The offshore yuan slipped, but later recouped its losses. The Shanghai stock index also was off earlier lows but was still down 0.6 percent, while the blue-chip CSI300 index shed 0.4 percent.

Moody's cut China's rating by one notch to A1 from Aa3 in its first downgrade of the country in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

China's massive debt has been at the center of concerns among economists and Beijing is walking a fine line as it tries to contain financial risks.

Moody's has no specific timetable for re-visiting China's rating but will monitor conditions on a regular basis, Marie Diron, associate managing director of Moody's Sovereign Risk Group, told Reuters. She said the risks to China's financial system were "broadly balanced."

China's finance ministry said the downgrade by Moody's was based on inappropriate methodology, saying it was exaggerating difficulties facing the economy and underestimating reform efforts.

The downgrade would probably not have a much broader spillover impact on global financial markets, said Suan Teck Kin, economist for United Overseas Bank in Singapore, noting that Moody's forecasts for China's economic growth seemed "too pessimistic".

Chinese authorities have stepped up regulatory curbs in recent months to defuse financial risks and have cracked down on risky lending practices, with the central bank moving toward tighter policy. But the steps have been largely cautious to avoid braking economic growth too sharply.

The U.S. dollar pulled away from recent 6-1/2 month lows as investors pored over President Donald Trump's first full budget plan.

Containing no major surprises, the plan called for an increase in military and infrastructure spending but also cuts to social spending in areas such as healthcare and food assistance.

U.S. Treasury Secretary Steven Mnuchin said he hoped to get tax reform passed this year, though this would not happen by August.

"Of course we're not really sure of the details of the budget plan, and what form it will finally take, but it has given the market the perception that everything is moving forward again, after recent distractions such as 'Russia-gate'," said Mitsuo Imaizumi, Tokyo-based chief foreign-exchange strategist for Daiwa Securities.

Political turmoil following Trump's recent firing of FBI Director James Comey, who was overseeing an investigation into possible links between the president's election campaign team and Russia, had raised fears that his administration's promised tax reform and fiscal stimulus would be derailed.

Investors also were awaiting the minutes of the U.S. Federal Reserve's latest policy meeting, scheduled to be released at 1800 GMT on Wednesday.

"Expectations that the Fed will hike next month are also supporting the dollar. Though a hike is not a done deal, it is still widely expected," Imaizumi said.

Fed funds futures suggested traders saw a nearly 80 percent chance that the U.S. central bank would raise rates at its June meeting, according to CME Group's FedWatch program.

The dollar index, which tracks the greenback against a basket of six major rivals, edged up 0.1 percent on the day to 97.456, pulling away from its lowest levels since November plumbed earlier this week.

The dollar added 0.1 percent against the yen to 111.90, while the euro was down 0.1 percent on the day at $1.1173.

Oil prices modestly extended gains after rising in the previous session on expectations of an extension to OPEC-led supply cuts.

U.S. crude was up 0.2 percent on the day at $51.55 per barrel, while Brent crude futures were also up 0.2 percent at $54.27.

Spot gold slipped 0.2 percent to $1,248.65 an ounce.

Oil prices rise as market expects extended production cut

Oil prices rose on Wednesday, supported by confidence that an OPEC-led output cut aimed at tightening supply would be extended to all of 2017 and the first quarter of next year.

Brent futures (LCOc1) rose to $54.34 per barrel by 0652 GMT, up 19 cents, or 0.35 percent, from their last close.

U.S. West Texas Intermediate (WTI) futures (CLc1) were at $51.64 a barrel, up 17 cents, or 0.33 percent.

Both benchmarks have gained more than 10 percent from their May lows below $50 a barrel, rebounding on a consensus that the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, would extend their pledge to cut supplies by 1.8 million barrels per day (bpd) to March 2018, instead of just covering the first half of 2017.

"OPEC is meeting on 25 May with an extension of supply cuts at the top of its agenda. With oil stocks nowhere near OPEC's ... objective of the recent five-year average level, an extension of cuts seems all but a foregone conclusion," French bank BNP Paribas(PA:BNPP) said.

BMI Research said that the OPEC-led cuts would only result in a balanced market this year, and that from 2018 onward markets would return to oversupply, albeit at a lower level than 2013-2016.

"Over a 5+ year horizon, oil price growth is in a structural slowdown, pressured by persistent supply gains," BMI said.


A key reason why markets have not tightened more has been U.S. oil production, which has soared by 10 percent since mid-2016 to 9.3 million bpd.

Benefiting from a market known as contango, in which future oil prices are higher than those for immediate delivery, U.S. drillers have sold future production in order to finance expanding output.

To stop this, analysts at Goldman Sachs (NYSE:GS) and elsewhere suggest the price curve should be pushed into backwardation, where future oil prices are below current ones.

While backwardation would reduce inventories, it is less clear whether it can stop rising production.

"When you have backwardation, it tells you to drain your tanks and produce more in order to monetize your production and reserves. As long as you make money from oil production, you'll produce and sell as much oil as you can," said John Driscoll, director of JTD Energy Services.

Past forward curves <0#CL:> show that U.S. oil production rose at its fastest pace during times when prices were in backwardation (2011 to 2014).

Though prices were then higher, Driscoll said U.S. producers are now so efficient that they can live with a lower market.

"Break-evens for some of the U.S. producers are estimated at close to $35-40 per barrel," he said.

Instead of selling future production in order to finance prompt output when the oil price curve is in contango, Driscoll said shale drillers can now use backwardation to sell prompt production while buying into the cheaper back-end of the curve as a hedge.

Gold edges higher in Asia after deadly Manchester concert venue blast

Gold edged higher in Asia on Tuesday after a deadly explosion at a concert venue in Manchester was said to be a terror attack with reports suggesting that the government is mulling rescheduling the June 8 polls for parliament.

Gold for June delivery on the Comex division of the New York Mercantile Exchange rose 0.04% to $1,261.87 a troy ounce.

Overnight, gold futures rose on Monday, supported by a slump in the dollar, after the euro rose to six-month highs while concerns over U.S. political turmoil underpinned demand for safe-haven gold.

Gold added to its 2% gain achieved last week, as investors continued to piled into the yellow-metal amid concerns that President Donald Trump may struggle to introduce his pro-growth economic agenda intended to boost the economy.

Trump’s alleged links to Russia and his abrupt decision to fire former FBI chief James Comey, have dominated moves in both the dollar and gold.

The dollar suffered its worst week in more than a year last week, as investors ditched the dollar amid growing concerns that Trump's plan to introduce initiatives such as tax-reform, deregulation and infrastructure spending, widely viewed as inflationary, would be derailed amid continued political uncertainty.

Dollar-denominated assets such as gold are sensitive to moves in the dollar – A dip in the dollar makes gold cheaper for holders of foreign currency and thus, increases demand.

Trump budget wants to halve oil stockpile, open Arctic refuge to drilling

U.S. President Donald Trump's White House wants to sell half of the nation's emergency oil stockpile and open the Alaska National Wildlife Refuge to drilling as part of plans to balance the budget over the next 10 years, documents by the administration showed.

The White House budget, which will be delivered to Congress on Tuesday, is meant as a proposal and may not take effect in its current form. But it reveals the administration's policy hopes, which include ramping up American energy output.

The U.S. Strategic Petroleum Reserve, the world's largest, holds about 688 million barrels of crude oil in heavily guarded underground caverns in Louisiana and Texas. Congress created it in 1975 after the Arab oil embargo caused fears of long-term motor fuel price spikes that would harm the U.S. economy.

The Trump budget proposes to start selling SPR oil in fiscal year 2018, which begins on Oct. 1, with sales that would generate $500 million, according to the documents. The sales from the reserve would gradually rise over the following years, peaking at nearly $3.9 billion in 2027, and totaling nearly $16.6 billion from 2018 to 2027.

The announcement surprised oil markets, and pulled down U.S. crude prices for immediate delivery to just over $50 per barrel during Asian trading hours. [O/R]

Yet the bigger effect, if implemented, would be more long-term as it is planned to last a decade. The Brent forward curve <0#LCO:> shows prices rising toward $55.60 per barrel by April 2018, but then declining toward $53.75 per barrel by late 2018.

The White House budget plan, released just after Trump left Saudi Arabia, the defacto leader of the Organization of the Petroleum Exporting Countries (OPEC), is seen as undermining OPEC-led plans to tighten global markets by cutting production, and points toward a future of ongoing ample supplies.


The Trump budget would also seek to raise $1.8 billion over the coming decade by leasing oil in the Arctic National Wildlife Reserve, the largest protected wilderness in the United States, believed to hold rich reserves of crude.

Increased drilling in Alaska would add to rising U.S. oil production which, largely thanks to shale, has jumped over 10 percent since mid-2016 to 9.3 million barrels per day.

U.S. politicians have been debating whether to open the reserve in northeastern Alaska to drilling since the 1970s, with opponents citing the risk of spills and the contribution to global climate change.

Trump has already moved to expand U.S. offshore drilling, including in parts of the Arctic, as part of his broader effort to support the oil and gas industries. He has also moved to trim the U.S. Environmental Protection Agency, including by proposing a more than 30 percent cut to its funding.

Mick Mulvaney, the director of the Office of Management and Budget, told reporters on Monday that the overall budget proposal was part of an effort to help the U.S. economy grow at a rate of 3 percent a year.

"It drives our tax reform policy, our regulatory policy, trade, energy ... everything is keyed toward getting us back to 3 percent," he said.

The White House did not immediately respond to questions about the energy-related budget proposals.

Trump's budget would also restart a nuclear waste fund that would bring in more than $3 billion by 2027.

The Obama administration stopped charging nuclear energy utilities the fee in 2014 after it stopped the licensing process for Nevada's Yucca Mountain - a waste dump that cost the government billions of dollars but never opened.

The Trump administration proposed reviving Yucca in details of the budget released in March.

U.K. threatens to quit Brexit talks

  • The U.K. will walk away from Brexit talks unless the EU drops demands to charge it €100B to leave the bloc, Brexit Secretary David Davis told the Sunday Times.
  • Negotiations would otherwise be plunged into "chaos," and even a £1B would be "a lot of money," he added. "We don't need to just look like we can walk away, we need to be able to walk away."
  • Now read: Markets Complacent Ahead Of French Elections

Oil rises on expectation of extended, possibly deepened output cut

Oil rose on Monday, pushed by reports that an OPEC-led supply cut may not just be extended into 2018 but might be deepened to tighten the market and prop up prices.

Brent crude futures were up 32 cents, or 0.6 percent, from their last close at $53.93 per barrel at 0643 GMT.

U.S. West Texas Intermediate (WTI) crude futures were back above $50 per barrel, trading up 29 cents, or 0.6 percent, at $50.62.

Both benchmarks have climbed more than 10 percent from their May lows earlier this month.

Prices have risen due to expectations that a pledge by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, to cut supplies by 1.8 million barrels per day (bpd) would be extended to March 2018, instead of covering just the first half of this year.

The option of deepening the production cut was also being discussed ahead of a meeting of OPEC and its allies in Vienna on May 25, sources said.

"Oil soared ... as rumors swirled that OPEC... was considering recommending the double whammy of a production cut extension and deeper cuts ahead of this Thursday's meeting," said Jeffrey Halley, analyst at futures brokerage OANDA in Singapore.

James Woods, analyst at Australia's Rivkin Securities, said that a deeper cut may be required to rein in oversupply.

This is because OPEC's oil supplies in 2017 have so far not actually fallen when compared with last year, when oversupply was seen at its worst.

In fact, the U.S. Energy Information Administration (EIA) expects "OPEC net oil export revenues will rise to about $539 billion dollars in 2017, versus 2016".

"The expected increase in OPEC's net export earnings is attributed to slightly higher forecast annual crude oil prices in 2017 as well as slightly higher OPEC output during the year," the EIA said.

Meanwhile, BMI Research said that "despite reducing production in early 2017 in line with the OPEC agreement, Russia will be able to manage its output so that both exports and production will be higher year-on-year in (overall) 2017."

OPEC's and Russia's pledge to tighten the market are also being undermined by oil drillers in the United States.

Goldman Sachs (NYSE:GS) says that the U.S. rig count for new oil production had jumped by 404 since May last year, a rise of 128 percent.

U.S. oil production has already climbed by 10 percent, or almost 900,000 bpd, since mid-2016 to 9.3 million bpd.

Bank of Japan faces credibility test in telegraphing exit from stimulus

Growing signs of life in Japan's economy have presented its central bank with a fresh communications challenge, pushing it to be clearer with markets on how it might dial back its massive stimulus - even though such action remains a long way off.

The Bank of Japan (BOJ) faces a tricky balancing act, according to people familiar with its policymakers' thinking, as it must convince people it has a credible exit strategy without destabilizing the bond market by giving too much away.

Graphic on central bank balance sheets since 2007: http://tmsnrt.rs/2ryoKCi

"There's no point elaborating on a future exit strategy when inflation remains stuck at zero," said one of the sources. "But it's important for the BOJ to show it isn't without a plan."

Telegraphing an exit is a challenge for any central bank, as seen in the 2013 "taper tantrum" of market volatility that followed hints from the Federal Reserve that its bond-buying program would slow.

The task is made all the more difficult for the BOJ, say analysts, because its credibility has already been damaged by the failure to come close to its 2 percent inflation target despite four years of money printing.

The market impact of miscommunication could also be bigger, with the BOJ's balance sheet having swelled to 90 percent of Japan's nominal gross domestic product - triple the ratio for the European Central Bank and nearly four times that of the Fed.

Still, the BOJ feels compelled to speak more openly about an exit, say the sources familiar with its thinking, as improvements in the economy - now enjoying its longest period of expansion in a decade - have spurred calls from some ruling party lawmakers for clarity on a future withdrawal of stimulus.

Instead of rebuffing debate of an exit strategy as premature, Governor Haruhiko Kuroda told parliament on May 10 the BOJ may consider publicizing calculations on how an exit could affect its financial health.

Deputy Governor Kikuo Iwata, among the most vocal proponents of massive asset purchases, also said on Thursday that raising interest on excess reserves financial institutions park with the BOJ could be among the tools it can use in easing back stimulus.

"The priority is to stress the BOJ's ultra-loose policy will remain intact," said another source. "That said, there is room for improvement" in communication beyond repeating that debate about an exit strategy is premature, the source said.

A BOJ spokesman said the central bank had "nothing to add beyond what Governor Kuroda said in public".


The BOJ has no immediate plans to publish numerical estimates on how a future monetary tightening could affect the health of its balance sheet, the sources say.

The central bank aims instead to convince markets it has the means to exit smoothly and reserves set aside to cover any losses it may incur from an abrupt spike in bond yields, without going into details, they say.

This reflects concerns held by many central bankers that revealing too much of a future exit plan could spook markets into thinking a policy shift is imminent.

Talk of an exit strategy could also cast doubt on the BOJ's determination to achieve its price goal, thereby undermining the psychological impact of its stimulus program, the sources familiar with its thinking say.

But growing concerns at the cost of the BOJ's radical monetary experiment voiced by some politicians and market participants have become hard to ignore, the sources say.

The BOJ already owns 40 percent of Japan's government bond market, and could face losses on those holdings if its moves to withdraw stimulus prompt a sudden rise in yields.

If it decides to tighten policy, the BOJ would need to guide market short-term rates higher by raising the interest it pays to excess reserves financial institutions park with it.

The cost of this could surpass the feeble interest the BOJ earns from its bond holdings, push its book into the red and hurt market confidence in the currency it prints, said Izuru Kato, chief economist at Totan Research.

Alarmed by such risks, a group of lawmakers from Prime Minister Shinzo Abe's ruling party called in April for more clarity from the BOJ.

"Some may argue that it's premature to discuss an exit strategy," the group, led by former cabinet minister Taro Kono, said in a proposal presented to the government. "But the BOJ must analyze the risks and communicate them to markets."

Even if the BOJ seeks to enhance transparency on its exit strategy, there is no guarantee markets will pay heed.

Kuroda deployed its massive asset-buying program in 2013, promising to achieve 2 percent inflation in two years. But four years into the program prices are barely rising.

Few market players share the BOJ's forecast that inflation will hit 2 percent by around early 2019. Many expect the BOJ's next move to be a withdrawal, not an expansion, of stimulus on the view its massive bond buying is unsustainable - despite repeated assurances by Kuroda that it can keep buying bonds.

Paul Sheard, chief economist at S&P Global, warns of the pitfalls of sending signals about an exit plan when markets remain skeptical the BOJ can achieve its price goal.

"There's a danger if the BOJ behaves like a traditional, forward-looking central bank," he said.

"Market players who don't believe the BOJ could achieve its target would take it as evidence it is making a policy error. I think Kuroda understands that. There's no hurry to do anything."

Oil jumps to session highs after bullish weekly stockpile data

Oil prices rose to session highs in North American trading on Wednesday, climbing back toward the strongest level in more than three weeks after data showed U.S. crude stockpiles fell for the sixth week in a row.

The U.S. West Texas Intermediate crude June contract tacked on 75 cents, or around 1.5%, to $49.39 a barrel by 10:35AM ET (14:35GMT). Prices were at around $48.73 prior to the release of the inventory data.

The U.S. benchmark rallied to its highest since April 28 at $49.66 at the start of the week on news that Saudi Arabia and Russia agreed to extend oil output cuts for a further nine months until March 2018.

Elsewhere, Brent oil for July delivery on the ICE Futures Exchange in London advanced 81 cents to $52.46 a barrel. The global benchmark touched its strongest level since April 21 at $52.63 on Monday.

The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 1.8 million barrels in the week ended May 12, the sixth weekly decline in a row.

Market analysts' expected a crude-stock decline of around 2.3 million barrels, while the American Petroleum Institute late Tuesday reported a supply-gain of 882,000 barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, increased by 35,000 barrels last week, the EIA said.

Total U.S. crude oil inventories stood at 520.8 million barrels as of last week, which the EIA considered to be at the upper half of the average range for this time of year.

The report also showed that gasoline inventories declined by 413,000 barrels, compared to expectations for a fall of 731,000 barrels.

For distillate inventories including diesel, the EIA reported a decline of 1.9 million barrels.

Oil rallied at the start of the week after Saudi energy minister Khalid al-Falih and his Russian counterpart Alexander Novak said they had agreed to prolong an existing production cut deal by another nine months until March 2018.

However, the 12 remaining OPEC members and other producers participating in the cuts have to agree to the extension during a meeting on May 25.

In November last year, OPEC and other major global producers, including Russia, agreed to cut output by about 1.8 million barrels per day between January and June, but so far the move has had little impact on inventory levels.

Elsewhere on Nymex, gasoline futures for June rose 2.3 cents, or around 1.5%, to $1.615 a gallon, while June heating oil gained 2.3 cents to $1.539 a gallon.

Natural gas futures for June delivery slid 2.6 cents to $3.204 per million British thermal units.

Wall Street tumbles as reform hopes fade with Trump crisis

The S&P 500 and the Dow notched their biggest one-day fall since Sept. 9 as investor hopes for tax cuts and other pro-business policies faded after reports that U.S. President Donald Trump tried to interfere with a federal investigation set off alarm bells on Wall Street.

Former FBI chief James Comey said in a memo that Trump had asked him to end a probe into former National Security Adviser Michael Flynn's ties with Russia, the reports said.

That was only the latest worry in a tumultuous week at the White House after Trump unexpectedly fired Comey and reportedly disclosed classified information to Russia's foreign minister about a planned Islamic State operation.

The developments intensified doubts that Trump would be able to follow through on his promises for tax cuts, deregulation and fiscal stimulus. Those pledges had helped fuel a record-setting post-election rally on Wall Street.

Selling accelerated late in the afternoon of one of the busiest trading days in months and the three major indexes ended near session lows.

"We've seen the Trump agenda derailed and try to get back on track several times. It's registering with more investors that its going to be hard to get back on track with the latest allegations," Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

"Prior to the election investors expected Trump to represent uncertainty," he said. "The market is now recognizing that some of the fears they had back in October are coming to fruition."

Both the Dow and S&P 500 fell below their 50-day moving average for first time since late April. The S&P began the session 0.74 percent lower, the largest gap down since March 30, 2009, when it opened trading with a 0.84 percent drop.

The Dow Jones Industrial Average (DJI) fell 372.82 points, or 1.78 percent, to 20,606.93, the S&P 500 (SPX) lost 43.64 points, or 1.82 percent, to 2,357.03 and the Nasdaq Composite (IXIC) dropped 158.63 points, or 2.57 percent, to 6,011.24.

The VIX (VIX), Wall Street's "fear gauge", shot up to 15.34, its highest level since April 18.

Nasdaq had its steepest one-day loss since June 24, after Britain voted to exit the European Union, as did S&P's financial (SPSY) and technology (SPLRCT) sectors. The financial sector closed down 3 percent while the technology sector fell 2.8 percent.

The S&P bank sub-sector <.SPXBK> dropped 4 percent, led by a 5.9 percent decline in Bank of America (N:BAC) shares and a 3.8 percent loss for JPMorgan (N:JPM).

“The bull market is not over by any means, but between the political stuff and the fact that the next earnings season is three months away, there’s going to be a lack of motivation,” said Donald Selkin, chief market strategist at Newbridge Securities in New York.

Nine of the 11 major S&P 500 sectors fell with the only gain from utilities (SPLRCU) and real estate <.SPLRCR>, defensive sectors with predictable if slow growth and high dividends.

Declining issues outnumbered advancing ones on the NYSE by a 3.92-to-1 ratio; on Nasdaq, a 5.64-to-1 ratio favored decliners.

The S&P 500 posted 11 new 52-week highs and 19 new lows; the Nasdaq Composite recorded 28 new highs and 93 new lows.

About 8.37 billion shares changed hands on U.S. exchanges in the busiest trading day since March 21, compared with the 6.9 billion-share average for the last 20 sessions.

Crude prices ease further in Asia on API build in oil inventories

Crude prices fell further in Asia on Wednesday as industry data cast a shadow on U.S. demand prospects after inventories unexpectedly rose.

On the New York Mercantile Exchange crude futures for June delivery dropped 0.97% to $48.19 after the API figures. On London's Intercontinental Exchange, Brent eased 0.81% to $51.23 a barrel.

U.S. crude inventories rose 882,000 barrels at the end of last week, the American Petroleum Institute (API) said on Tuesday, compared to a decline of 2.3 million barrels seen and last week's figure that showed a 5.789 million barrels decline. The API estimates are followed by official figures from the Energy Information Administration on Wednesday.

Distillate stocks gained 1.79 million barrels and gasoline supplies fell 1.78 million barrels. Supplies at Cushing, Oklahoma, fell by 540,000 barrels. Analysts expected a 1.050 million barrels decline in distillates and an 731,000 barrels dip in gasoline supplies.

Overnight, crude futures settled lower on Tuesday, as investors awaited a fresh weekly batch of U.S inventory data amid growing support from energy ministers for prolonged supply cuts to March 2018.

Investors’ optimism grew that the OPEC-led supply-cut agreement would be extended for a period of nine months, until March 2018, after Kuwait became the latest oil producing nation to support the idea of prolonged supply cuts.

Kuwait's oil minister, Essam al-Marzouq, said he supported the agreement between Saudi Arabia and Russia that supply cuts needed to be extended until March 2018.

On Monday, Saudi Energy Minister Khalid al-Falih said that the deal to cut global production and rein in supply has significantly reduced inventories, but added that further cuts were needed to trim the level of inventories to the five-year average.

"There has been a marked reduction to the inventories, but we're not where we want to be in reaching the five-year average," Saudi Energy Minister Khalid al-Falih said on Monday.