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Oil Rises Above $50 as OPEC Members Seen Backing Longer Cuts

Posted On May 19th
By : EnergyNow Media
Comment: Off

May 19, 2017

(Bloomberg) 

Oil rose above $50 a barrel in New York for the first time in three weeks on the expectation that OPEC will reaffirm efforts to drain a global glut.

U.S. futures rose as much as a 1.5 percent, heading for the biggest weekly gain since March. Most members support a proposal by Saudi Arabia and Russia to extend supply cuts for nine months, Algerian Energy Minister  Noureddine Boutarfa said Thursday. A Bloomberg survey of analysts this week showed the Organization of Petroleum Exporting Countries and its allies will probably prolong their agreement at least until the end of the year.

“OPEC ministers likely will continue to talk oil higher, there is more chatter on the discussion and that means there will be more volatility in prices,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “We still expect prices to move to $60 over the coming months because the oil market will be in a deficit as supply growth will lag demand growth.”

OPEC and its partners will meet on May 25 in Vienna to decide whether to prolong their supply cuts past June. Several members have voiced support for the proposal to extend curbs after Russia and Saudi Arabia said global inventories haven’t yet fallen to targeted levels. Meanwhile, production in the U.S. has been increasing, threatening to derail the group’s goal.

West Texas Intermediate for June delivery gained as much as 75 cents to $50.10 a barrel and traded at $50.08 on the New York Mercantile Exchange at 1:51 p.m. in London. Prices are up 4.7 percent this week, the most since the period through March 31. Total volume traded was 29 percent above the 100-day average.

Output Deal

Brent for July settlement increased as much as 83 cents, or 1.6 percent, to $53.27 a barrel on the London-based ICE Futures Europe exchange. The contract added 30 cents to close at $52.51 on Thursday. Prices are up 4.9 percent this week, heading for a second weekly gain. The global benchmark crude traded at a $2.88 premium to July WTI.

See also: OPEC loses power of surprise as majority back cuts extension.

Algeria, which was instrumental in crafting OPEC’s historic output deal last year, has reduced  production by 55,000 barrels a day, according to Boutarfa, who sees oil field maintenance in May and June curbing its output by a further 15 percent. The country is also proposing to set up a high-level committee of experts to advise OPEC and non-OPEC ministers on extending or curtailing the curbs, he said.

Oil-market news:

Spring started with American drivers consuming a record amount of gasoline, the American Petroleum Institute said on Thursday, a positive sign for oil markets counting on U.S. demand to help ease a supply glut. Azerbaijan favors oil production cuts are extended until end-2017 rather than March 2018, the country’s Energy Minister Natiq Aliyev said at a meeting with the U.S. ambassador in Baku, according to an emailed statement. Brent futures could move into a price structure called backwardation — where later contracts trade at a discount to earlier ones — in the second half of this year if OPEC extends its cuts, according to Bank of America Merrill Lynch. Norway’s oil output in April rose 4.2 percent to 1.7 million barrels a day compared with a year earlier, Norwegian Petroleum Directorate said in statement on its website. OPEC’s Economic Commission Board, a panel of representatives from member countries, is considering the implications of various scenarios including extended production cuts, deeper supply reductions and the expiry of the curbs in June, according to a delegate familiar with the matter.

 

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