Oil futures rose to the highest in almost a month on growing optimism that big producing countries will extend output cuts to curb a persistent glut in crude, with key benchmarks heading for a second week of gains.
Russian Federation reduced its oil output by 300,000 barrels per day, as stipulated in the Vienna deal signed between OPEC and non-OPEC countries, Russia’s Energy Minister Alexander Novak said on May 18.
A second source said a deeper cut in output was an option depending on estimated growth in supply from non-OPEC producers and United States shale oil.
The price for July futures of Brent crude oil has increased by 0.65 percent to $52.85 per barrel as of 06:25 (GMT +4). The market is about priced for an extension of supply cuts next week, although there is possibility of some uncertainty about whether it would be for six or nine months, stated Danske Bank. The contract is also heading for a weekly increase of nearly 4 percent.
Light sweet crude oil (WTI) futures went up 0.28 dollar or 0.57 percent to close at USD 49.35 a barrel at the New York-based commodity exchange NYMEX. USA benchmark crude was up 61 USA cents at US$49.96 a barrel.
Oil prices fell on Thursday on signs that the market remained well supplied with crude despite efforts by OPEC and other big exporters to curb production and support prices.
“Today’s meeting is just informative, nothing major”, an OPEC source said.
Traders also seem to be overlooking the persuasive argument that given huge stockpiles and less-than-stellar global demand, an OPEC extension without deeper cuts will have minimal positive impact.
The Organization of the Petroleum Exporting Countries, Russia and other producers originally agreed to cut production by 1.8 million barrels per day for six months from January 1 to support the market. USA producers are not party to any agreements capping production. Overall production from non-OPEC members, including about a dozen that are party to the multilateral production arrangement, is expected to grow by 600,000 barrels per day this year. “On the other, there are those who are focused on the real drawdowns that have started to occur in U.S. oil stocks over the past month or so”, he said.