Oil Rises to One-Month High as OPEC Poised to Extend Output CutsBy
Nationwide supplies fell 1.5 million barrels last week: API
Iraq earlier backed proposal to extend curbs for nine months
Oil climbed to a one-month high as OPEC is set to extend production curbs and U.S. stockpiles decline.
Futures advanced a fifth day after Iraq backed an extension of the cuts into 2018, adding to growing support for the Saudi-Russian proposal. Meanwhile, American supplies fell 1.5 million barrels last week, the American Petroleum Institute was said to report.
Oil rose back above $50 a barrel at the end of last week as Saudi Arabia and Russia rallied support for a nine-month extension to the output-cut deal agreed to by the group and its allies last year. They will meet in Vienna on Thursday at a time when Nigeria and Libya are restoring output, Iraq plans new production projects and U.S. 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 rose 34 cents to $51.47 a barrel on the New York Mercantile Exchange. It was the highest settlement since April 18. Total volume traded was about 18 percent below the 100-day average. WTI traded at $51.53 at 4:44 p.m. after the API report was released.
Brent for July settlement advanced 28 cents to $54.15 a barrel on the London-based ICE Futures Europe exchange. It was also the highest close since April 18. The global benchmark ended the session at a $2.68 premium to WTI.
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. The Organization of Petroleum Exporting Countries’ Joint Ministerial Monitoring Committee will study the merits of extending oil-output cuts by six, nine and 12 months, according to two delegates with knowledge of the matter.
"The OPEC extension is a bullish development," Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion, said by phone. "How long they decide to extend the cuts is important. The market wants forward guidance."
U.S. 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.
"This would result in a steady drip of supply that would slam the domestic oil industry," O’Grady said. "Clearly, the market doesn’t believe it will happen, because if it did prices would be down sharply."
The U.S. Energy Information Administration is projected to report that crude stockpiles declined by 2 million barrels in the week ended May 19, according to a Bloomberg survey of analysts. Supplies of gasoline probably dropped 1.08 million barrels, while inventories of distillate fuel, a category that includes diesel and heating oil, slipped 493,000 barrels last week.
- Oil cuts have “been working, and I know it will work even better for the second half,” United Arab Emirates Energy Minister Suhail Al Mazrouei said in Abu Dhabi.
- Iraq’s state oil marketing co., SOMO, is in the very early stages of exploring the potential to hedge as much as 25 percent of nation’s crude output or exports, Director General Falah al-Amri said in interview in London.
— With assistance by Paul Burkhardt