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Oil prices see biggest jump in two weeks
OIL added to its biggest advance in more than two weeks after fresh evidence of the Opec+ coalition's resolve to cut output and a deepening crisis in Venezuela supported a bullish outlook for prices.
Futures in New York rose as much as 0.7 per cent after jumping 2.4 per cent in the previous session. Opec (the Organization of the Petroleum Exporting Countries) crude production fell for a fourth month in March, data showed on Monday. Power blackouts in Venezuela further squeezed supplies, while US stockpiles probably declined by 900,000 barrels last week, a Bloomberg survey found ahead of the official figures due on Wednesday.
Oil has rallied around 36 per cent this year due to the effectiveness of the Saudi Arabian-led production cuts, as well as recent signs the global growth outlook may not be as bad as previously feared. The output reductions, which are set to expire in June, could be easily extended, Iranian Oil Minister Bijan Namdar Zanganeh said Monday in Moscow after meeting his Russian counterpart.
Howie Lee, an economist at Oversea-Chinese Banking Corp (OCBC) in Singapore said: "Saudi Arabia has walked the talk and cut its supplies every month, so there has been pressure on every other country to comply." Whether Opec and its allies extend the reductions, and the upcoming decision on the Iran waivers will be key price drivers, he said.
West Texas Intermediate (WTI) for May delivery rose 16 cents to US$61.75 a barrel on the New York Mercantile Exchange as at 2.30 pm in Singapore. It climbed as much as 43 cents earlier and peaked at US$62.02, the highest intraday price since Nov 8.
Brent for June settlement increased 15 US cents to US$69.16 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude's premium over WTI for the same month narrowed to US$7.30 a barrel.
The 14 Opec members pumped 295,000 barrels less of oil a day last month than in February, restricting total output to 30.385 million barrels. Saudi Arabia cut production to a four-year low of 9.82 million barrels a day, a a Bloomberg survey of officials, analysts and ship-tracking data found.
OCBC's Mr Lee said that there may be a "sentiment-driven" rally if the output cuts are extended, but compliance could weaken. "There's a very strong incentive for them to not comply" when prices are at around US$62 a barrel, he said.
Venezuelan production slumped to 600,000 barrels a day last month, from around a million in February, as power blackouts forced the key oil port of Jose to close for nearly eight days. The threat of additional US sanctions is also hanging over Iranian supply, while the White House is set to decide by early May on whether waivers allowing some countries to keep buying oil from the Persian Gulf nation will be extended. BLOOMBERG