You are here
Oil rebounds as Opec's hints of extended cuts stoke optimism
OIL rebounded from its biggest loss in more than a week as Opec hinted at extending output cuts - fanning optimism and investors' anticipation of a drop in US stockpiles.
Futures in New York climbed 0.5 per cent after losing 1.7 per cent 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 that US crude inventories probably fell last week after holding below the five-year average for 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, said by phone from Tokyo. Anticipation that 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 US$66.64 a barrel on the New York Mercantile Exchange, and traded at US$66.57 at 3.42 pm in Tokyo. The contract fell US$1.17 to close at US$66.22 on Monday. Total volume traded was about 19 per cent below the 100-day average.
Brent for June settlement added 32 cents to US$71.74 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a US$5.20 premium to June WTI.
Yuan-denominated futures for September delivery added 0.1 per cent to 424.9 yuan (S$89) a barrel on the Shanghai International Energy Exchange. The contract lost 0.6 per cent 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 per cent in March from a revised 78 per cent 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 on Wednesday. Nationwide inventories fell below the five-year average in March for the first time since 2014.
In other oil-market news: China's crude processing rose to a record on a daily basis in March as processing giants increased activity after the Lunar New Year holidays, according to data released by National Bureau of Statistics on Tuesday.
Brent crude will climb to near US$80 a barrel if President Donald Trump reimposes sanctions on Iran, said Abhishek Deshpande, JPMorgan Chase head of oil market research and strategy.
Production from the world's most prolific oil play is expected to set new records as drillers keep on adding more wells. BLOOMBERG