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Oil rebounds as OPEC hints at extending output cuts stokes optimism

Record US crude production remains a major worry for OPEC and its allies who have been battling to reduce a global glut via supply reductions for the last 15 months.

business Updated: Apr 17, 2018 12:40 IST
Tsuyoshi Inajima
Tsuyoshi Inajima
Bloomberg
Oil,crude oil,OPEC
Oil surged to a three-year high last week after geopolitical risks such as the conflict in Syria and tensions between Saudi Arabia and Iran-backed rebels in Yemen raised concerns over potential supply disruptions.(Reuters File Photo)

Oil rebounded from the biggest loss in more than a week as OPEC hinting at extending output cuts fans optimism and investors anticipate a drop in US stockpiles.

Futures in New York climbed 0.5% after losing 1.7% on Monday. Kuwait said the Organization of Petroleum Exporting Countries and allied producers will discuss extending an agreement to cut oil output into 2019. Adding to optimism, analysts surveyed by Bloomberg forecast US crude inventories probably fell last week after holding below the five-year average the previous four weeks.

Oil surged to a three-year high last week after geopolitical risks such as the conflict in Syria and tensions between Saudi Arabia and Iran-backed rebels in Yemen raised concerns over potential supply disruptions. Record US crude production remains a major worry for OPEC and its allies who have been battling to reduce a global glut via supply reductions for the last 15 months.

“OPEC and its allies are expected to control their supplies at levels that meet demand even after crude inventories decline,” Jun Inoue, a senior economist at Mizuho Research Institute Ltd., said by phone from Tokyo. Anticipation OPEC will continue to manage supply as well as “declining US crude inventories should support oil prices.”

West Texas Intermediate for May delivery climbed as much as 42 cents to $66.64 a barrel on the New York Mercantile Exchange, and traded at $66.51 at 12:34 p.m. in Tokyo. The contract fell $1.17 to close at $66.22 on Monday. Total volume traded was about 19% below the 100-day average.

Brent for June settlement added 23 cents to $71.65 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.17 premium to June WTI.

Yuan-denominated futures for September delivery added 0.2% to 425.4 yuan a barrel by midday break on the Shanghai International Energy Exchange. The contract lost 0.6% on Monday.

OPEC and allied producers including Russia will consider continuing the global production limits beyond the end of the year when they meet in June to assess the market, Kuwaiti Oil Minister Bakheet Al-Rashidi said. The compliance rate for the 10 non-OPEC nations participating in the cuts rose to 85% in March from a revised 78% in February, according to Bloomberg calculations from preliminary output data by the International Energy Agency.

In the US, crude stockpiles probably fell 600,000 barrels last week, according to the median estimate in the survey before government data Wednesday. Nationwide inventories fell below the five-year average in March for the first time since 2014. Stocks in Cushing, Oklahoma, the delivery point for WTI futures, probably decreased 650,000 barrels last week, a Bloomberg survey shows, after rising for five weeks through April 6.

--With assistance from Heesu Lee

First Published: Apr 17, 2018 12:05 IST