Oil Rises to Three-Week High as OPEC Members Back Cuts Extension

  • Most participants favor 9-month extension: Algeria’s Boutarfa
  • U.S. crude output fell first time in 13 weeks, supply drops

Crude rose to a three-week high after Algeria said an extension to OPEC’s production curbs would be backed by most participating countries.

Futures climbed 0.6 percent in New York. Algerian Energy Minister Noureddine Boutarfa said Thursday that most OPEC members support Saudi Arabia and Russia’s proposal to prolong the curbs to March next year, and that the rate of compliance should increase. Prices had fallen earlier as the market got caught up in the turmoil surrounding Donald Trump. 

The Organization of Petroleum Exporting Countries and its partners are scheduled to meet next week to decide if the supply deal will be rolled over when it expires in June. OPEC’s Kuwait, Iraq and Venezuela, and non-members Oman and South Sudan support the proposal to extend curbs for nine months.

"There’s a lot of chatter about extending the cuts for nine months, which is supportive," Jason Schenker, president of Prestige Economics LLC in Austin, Texas, said by telephone. "Not many people will want to be bearish as the meeting approaches. There’s sure to be a decision that will be designed to boost prices."

West Texas Intermediate for June delivery rose 28 cents to $49.35 a barrel on the New York Mercantile Exchange. It’s the highest close since April 26. Total volume traded was about 7 percent above the 100-day average.

Brent for July settlement increased 30 cents to $52.51 a barrel on the London-based ICE Futures Europe exchange. It’s the highest close since April 20. The global benchmark crude ended the session at a $2.85 premium to July WTI.

Extension Length

"Saudi Arabia, Russia, Kuwait and Iraq have all stated that they support a nine-month extension," Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone. "Now, we’re waiting to see what’s actually accomplished next week."

OPEC members agreed in November to cut 1.2 million barrels a day of oil production. Several non-members, including Russia, agreed in December to contribute a combined 600,000 barrels a day of output reductions. OPEC’s rate of compliance with its promised cutbacks has averaged 96 percent this year, according to the International Energy Agency. 

See also: OPEC prepares for long battle to see off shale

U.S. crude stockpiles declined 1.75 million barrels to 520.8 million barrels last week, down from a record 535.5 million at the end of March, according to the Energy Information Administration. Production dropped to 9.3 million barrels a day, EIA data on Wednesday show.

"There’s room for guarded optimism," Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida, said by telephone. "OPEC appears to be close to an agreement to roll over the cuts and U.S. inventories are finally starting to decline."

Oil-market news:

  • Venezuela, the oil-rich Latin American country that signed up to OPEC’s supply cuts, has curbed output more than any other member in the past year.
  • OPEC will extend an accord that trims production, even as surging U.S. output threatens the group’s goal of draining excess supply, according to a Bloomberg survey.
  • Iraq is on track for what may be its highest monthly crude exports, even as the country supports moves to extend OPEC-led production cuts aimed at trimming bloated global inventories.
  • Saudi Arabia’s crude oil exports rose 4 percent from a month earlier to 7.232 million barrels a day in March while output fell 1.1 percent, according to the Joint Organizations Data Initiative.

— With assistance by Rakteem Katakey

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