Oil rose to the highest in a month as Saudi Arabia said all producers participating in output cuts agree on prolonging the deal through the first quarter of 2018.
Futures climbed as much as 1.5 percent in New York after advancing 5.2 percent last week. Prolonging the cuts will help producers reach their goal of trimming stockpiles in developed economies to the five-year average, Saudi Arabia’s Energy Minister Khalid Al-Falih (pictured) said on Sunday. The exact duration of an extension will be discussed in Vienna on May 25, said Opec Secretary-General Mohammad Barkindo.
Oil has climbed as Saudi Arabia and non-Opec member Russia rally support for a nine-month extension to the deal to curb output by the Organization of Petroleum Exporting Countries and its allies. Not all participants were fully on board with the proposal, with Iraq supporting another six months of cuts, according to Falah Al-Amri, the head of the country’s State Oil Marketing Organization.
“Clearly there is positive momentum in the oil market as it is continuing to price the OPEC deal,” said Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen. “Judging from the price movements, a nine-month extension of the deal may not be priced in yet.”
West Texas Intermediate for June delivery, which expires Monday, rose as much as 73 cents to $51.06 a barrel on the New York Mercantile Exchange. Total volume traded was about 2 percent above the 100-day average. The more-active July contract gained 71 cents to $51.38 at 1:32 p.m. in London.
Brent for July settlement climbed as much as 76 cents, or 1.4 percent, to $54.37 a barrel on the London-based ICE Futures Europe exchange. Prices rose 5.5 percent last week. The global benchmark crude traded at a premium of $2.93 to July WTI.
“OPEC and some non-OPEC producers are highly likely to maintain cuts for another six to nine months and this is likely to drive global oil inventories down towards normal at the end of 2017,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “But if the U.S. market keeps adding 30 rigs a month till then, production is likely to grow by 2.3 million barrels a day, putting a downside price risk on 2018 and 2019.”
Rigs targeting crude in the US are on the longest run of gains since August 2011, climbing by eight to 720 last week, according to data Friday from Baker Hughes Inc.
Iraq’s Oil Minister Jabbar Al-Luaibi said almost all countries participating in the cut had agreed to extend it, though there was no consensus yet on how long the extension should be.
“Some ministers say nine months, some ministers think six months,” Al-Luaibi said Sunday in an interview in Jordan. Iraq is Opec’s largest producer after Saudi Arabia.