Oil trades near one-month high as OPEC poised to extend cuts
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New York/Johannesburg: Oil traded near a one-month high as traders weighed the prospect of OPEC prolonging production curbs against the group’s struggle thus far to drain bloated stockpiles.
Futures fluctuated in New York after rising 4.3% the previous four sessions. Iraq backed an extension of output cuts into 2018, adding to growing support for the Saudi-Russian proposal. In the US, crude inventories probably slid by 2 million barrels last week, according to a Bloomberg survey before government data on Wednesday, while the White House outlined plans to sell strategic petroleum stockpiles.
Oil rose back above $50 a barrel at the end of last week as Saudi Arabia and non-OPEC member Russia rallied support for a nine-month extension to the output-cut deal agreed by the Organization of Petroleum Exporting Countries (OPEC) and its allies last year. Ministers will gather in Vienna on Thursday to decide on a renewal of cuts at a time when Nigeria and Libya are restoring output, Iraq plans new production projects and US drillers continue to add rigs.
“We’re on the cusp of a rollover of the OPEC deal,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. “We haven’t heard from Iran yet or how they plan to deal with Nigeria and Libya, which are coming back. If those two countries continue to recover they have the ability to make up for the cuts made elsewhere.”
West Texas Intermediate for July delivery fell 4 cents to $51.09 a barrel at 10:09 am on the New York Mercantile Exchange. The June contract expired Monday after advancing 0.8% to $50.73.
Brent for July settlement fell 7 cents to $53.80 a barrel on the London-based ICE Futures Europe exchange, and traded at a $2.71 premium to WTI. The global benchmark crude climbed 0.5% to $53.87 on Monday.
Kuwaiti oil minister Issam Almarzooq said some countries still aren’t on board for a nine-month extension, but there’s a preliminary agreement on a six-month deal that will be reviewed in November.
“An extension of the supply deal seems to have become a formality,” said Norbert Ruecker, head of commodities research at Julius Baer Group Ltd. ‘‘Unlike the sharp bounce seen in late November when the supply deal was announced first, oil prices have only reacted modestly so far. The lukewarm reception to the news reveals that the belief in a successful OPEC strategy is eroding.”
US President Donald Trump’s plans to sell off half the nation’s Strategic Petroleum Reserve, or SPR, as part of proposed changes to the government’s role in energy markets may send additional supply to the market.
“The US president is proposing selling off some of the SPR, but he’s trying to do it in 2018” so any price impact on Tuesday will be short-lived, said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. in London. Bloomberg