Big production cuts are coming, but is it enough to ignite oil prices?

The world’s largest oil producers have met over the weekend and – to the surprise of some observers – agreed to a 9.7-million-barrel-per-day production cut in a bid to address the supply glut and pull prices out of the gutter.

This represents almost 10 per cent of global supply and was welcomed by US President Donald Trump, who claimed last week that he had managed to talk both Saudi Arabia and Russia into agreeing to the cuts.

Despite an initial jump on the news, oil prices failed to rally in any meaningful way with the benchmark West Texas Intermediate crude currently trading at $US22.85 ($35.75) per barrel while the Brent crude was priced at $US31.74.

This is nearly flat from the last traded prices of $US22.76 and $US31.48 respectively on Thursday.

Concerns have been raised that the actual reductions would meet the publicised figures or actually account for the fall in demand.

Saudi Arabia’s recently announced pricing for May also hints that the major oil producer is still angling to increase its market share in Asia by increasing discounts in that region while raising prices of crude sold to the US.

The impact of low oil prices could have played a role in the proposed takeover of Australia’s sole small cap LNG stock Liquefied Natural Gas (ASX:LNG) falling apart.

This comes after First Wall Street Capital failed to provide bridge financing to the company for ongoing marketing and development of its LNG projects, which bidder LNG9 said would cause certain conditions of its proposed takeover bid to be triggered or be incapable of being satisfied.

As a result, the Singapore-based private company has withdrawn from the deal though it remains interested in acquiring all or a material part of LNG or its assets.

Jupiter Energy (ASX:JPR) has reversed its late March decision to shut in oil production from its operations in Kazakhstan after landing a more attractive prepayment proposal from a local trader.

It said the new contract and further cost cutting measures would enable production from the Akkar North and West Zhetybai oil fields to continues.

However, the company has still reduced its Kazakh workforce from 37 to about 25 people.

Jupiter Energy also remains focused on finalising the commercial production contract for the Akkar East oil field.

Meanwhile, Galilee Energy (ASX:GLL) has kicked off a maiden three-well exploration program aimed at converting resources at its Kumarilla project in the Surat Basin, Queensland, into reserves.

The wells will core the target Walloon coals and obtain a full suite of wireline logs. This will enable a full assessment of the coal seam gas resource and assist with planning the future drilling and pilot program.

Kumbarilla hosts 504 petajoules (477.7 billion cubic feet) of independently certified contingent gas resources that can be quickly brought to market through its proximity to existing coal seam gas production infrastructure.