Oil held gains following the highest close in more than two weeks, after Saudi Arabia and Russia stoked expectations OPEC-led production cuts might be extended for nine months.

Futures climbed in New York. Prices jumped 2.1 percent Monday after energy ministers from Saudi Arabia and Russia said they favor prolonging crude-output cuts by global producers through the first quarter of 2018. U.S. crude stockpiles probably have decreased for a sixth week, according to a Bloomberg survey before a government report Wednesday.

The largest of the 24 producers that agreed to cut supply for six months are reaffirming their commitment to the deal amid growing doubts over its effectiveness so far. Still, a surge in U.S. production, together with an increase in Libyan output and signs of recovery in Nigeria, may undercut the Organization of Petroleum Exporting Countries’ strategy to re-balance the market.

“The comments from Saudi Arabia and Russia are driving prices up but I’m skeptical that crude will see a new level,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc., said by phone in Seoul. “As producers in the U.S. are expected to increase output, prices will continue to be restricted from rising.”

West Texas Intermediate for June delivery climbed 22 cents, or 0.5 percent, to $49.07 a barrel on the New York Mercantile Exchange at 11 a.m. in Seoul. The contract rose $1.01 to close at $48.85 a barrel on Monday, the highest since April 28. Total volume traded was about 25 percent below the 100-day average.

U.S. Supplies

Brent for July settlement gained 26 cents to $52.08 a barrel on the London-based ICE Futures Europe exchange. The contract added 98 cents, or 1.9 percent, to settle at $51.82 a barrel on Monday. The global benchmark crude traded at a $2.65 premium to July WTI.

Nationwide crude stockpiles are forecast to have declined by 2.75 million barrels to 519.8 million barrels in the week ended May 12, according to a Bloomberg survey of analysts. Supplies of gasoline probably dropped 1 million to 240 million barrels while inventories of distillate fuel, a category that includes diesel and heating oil, slipped 1.25 million to 147.5 million barrels last week.

Oil-market news:

OPEC net oil-export revenue will probably rise this year after falling to a 12-year low in 2016, the U.S. said Monday.

For 16 years, Middle Eastern crude reigned as the oil of choice for refineries on the U.S. West Coast. Now OPEC’s export cuts are reshuffling shipments and turning the tide in favor of Latin American producers.

Source:
courtesy of BLOOMBERG

by Heesu Lee and Stephen Stapczynski

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