Oil Rises as Saudi Arabia Said to Support Extending OPEC Cuts

  • Saudis said to have pumped 9.9 million barrels a day in March
  • API said to report U.S. crude supplies dropped 1.3m barrels

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Brent oil rose a seventh day, capping the longest stretch of gains since 2012, after Saudi Arabia was said to likely support prolonging OPEC output cuts. Prices climbed from the close after a reported U.S. supply drop.

It’s not clear there has been a final decision on an extension, which would also depend on the positions of other OPEC members and Russia, according to a person familiar with Saudi Arabia’s internal discussions. The kingdom cut output to 9.9 million barrels a day in March, below levels it committed to under the deal, a person with knowledge of the data said. U.S. crude stockpiles slipped 1.3 million barrels last week, the industry-funded American Petroleum Institute was said to report Thursday.

Saudi Arabia joins other members of the Organization of Petroleum Exporting Countries that voiced support for an extension. The curbs have stabilized the market, according to Russia, which is among 11 countries outside the group that have joined in the pact aimed at easing a global glut. American crude output will rise to a record next year, the Energy Information Administration said in its monthly Short-Term Energy Outlook released Tuesday.

“It looks like the Saudis want to extend the cuts, which was in doubt,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “It looks like they’ve had a modicum of success reducing global stockpiles and this is supporting prices.”

Brent for June settlement increased 25 cents, or 0.4 percent, to $56.23 a barrel on the London-based ICE Futures Europe exchange. It’s the highest close since March 1 and capped the longest stretch of gains since July 2012. The global benchmark grade closed at a $2.44 premium to June West Texas Intermediate oil.

WTI for May delivery rose 32 cents, or 0.6 percent, to $53.40 a barrel on the New York Mercantile Exchange. It was the highest close since March 1 and the sixth straight gain, the longest stretch since December. Total volume traded was about 2.9 percent below the 100-day average. May futures traded at $53.43 at 4:49 p.m. after the API report.

Vienna Talks

OPEC ministers are scheduled to gather in Vienna on May 25 to discuss whether to roll over for another six months the 1.2 million barrels a day in production cuts it implemented in January. Saudi Arabia will decide on an extension depending on the stance of other OPEC nations such as Iraq and Iran, as well as Russia, which isn’t a member of the group but joined the output cuts, the person familiar with the kingdom’s policy said.

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“We’re watching the Saudis positioning themselves before OPEC gathers on May 25,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by telephone. “It will be very interesting to watch how the discussions go in the runup to the meeting with other OPEC members and Russia. We’ll get a good idea of whether or not this coalition survives.”

U.S. crude inventories climbed to 535.5 million barrels at the end of March, the highest in weekly data compiled by the Energy Information Administration since 1982. Crude stockpiles probably dropped by 1.5 million barrels in the week ended March 7, according to the median of analysts responses in a Bloomberg survey before an EIA report Wednesday.

Oil-market news:

  • Libya’s oil production fell by 30 percent to the lowest level since September as the OPEC producer’s biggest field stopped pumping just one week after reopening from an earlier halt.
  • Global stockpiles will continue to decline over the coming months as refiners process more crude after returning from maintenance, Kuwait’s Oil Minister Issam Almarzooq said, according to a report from the Kuwait News Agency.
  • Global oil prices are “still below required level,” Iraqi PM Haider Al-Abadi said in televised news conference, without specifying a target.

— With assistance by Grant Smith

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