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Oil holds above US$56 after surging on Saudi cut-extension plea

[LONDON] Oil held above US$56 a barrel after surging the most in almost two weeks as Saudi Arabia's energy minister said Opec should announce an extension to supply cuts when it meets at the end of the month.

Futures were little changed in New York after rising 2.6 per cent Friday. Oil inventories are unlikely to drain to average levels by the time the Opec agreement expires at the end of March, Saudi Arabia's Khalid Al-Falih said Thursday. The US drill-rig count was unchanged at 738 at the end of last week, data from Baker Hughes showed.

Oil dipped slightly last week on a weaker demand outlook while Russia cast doubts on the timing of a decision to extend supply cuts led by the Organization of Petroleum Exporting Countries.

Wagers on lower Brent prices rose by the most since June through the week to Nov 14 amid uncertainty over Saudi Arabia's push to prolong output curbs. Yet an extension remains likely, according to PVM Oil Associates Ltd.

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"It is widely believed that Opec, together with 10 non-Opec countries, will roll over their production for the whole of 2018," said Tamas Varga, an analyst at PVM in London.

West Texas Intermediate for December delivery, which expires Monday, slipped 13 cents to US$56.42 a barrel on the New York Mercantile Exchange at 11.02am London time. Total volume traded was about 12 per cent above the 100-day average. Prices declined 0.3 per cent last week. The more-active January contract dropped 15 cents to US$56.56.

Brent for January settlement lost 45 cents to US$62.26 a barrel on the London-based ICE Futures Europe exchange, after dropping 1.3 per cent last week. The global benchmark crude traded at a premium of US$5.71 to January WTI.

Saudi Arabia has had extensive consultations with Russia, according to Al-Falih, who said he's convinced that the country will be "fully on board" when a resolution is made.

Opec will ensure that its exit strategy from the current accord will be a gradual adjustment that prevents the return of any glut, he said.