Oil climbs above $50 as OPEC expected to prolong curbs next week

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That source said a deeper cut in output was an option depending on estimated growth in supply from non-OPEC producers, mainly USA shale oil firms, among other scenarios.

Futures advanced as much as a 1.8% in NY, heading for the biggest weekly gain since March. The Organization of Petroleum Exporting Countries and its allies will probably prolong their agreement at least until the end of the year, according to a Bloomberg survey of analysts this week.

An OPEC panel reviewing scenarios for next week’s policy-setting meeting is looking at the option of deepening and extending an OPEC-led deal to reduce oil output, OPEC sources said on Friday. While Russia and Saudi Arabia said this week they’re in favor of extending output curbs until March to shrink global stockpiles, Societe General SA said this isn’t a “game changer” for the oil price.

U.S. West Texas Intermediate (WTI) crude CLc1 was down 16 cents, or 0.3 percent, at $48.91. With U.S. shale oil production surging, inventories remain stubbornly high and prices appear stuck in the low-$50s per-barrel range. A positive outcome (i.e., a fully agreed 9-month production extension) and a further drop in U.S. production could lead to the market testing and possibly breaking above the lower higher in April of $53.65.

Brent for July settlement increased as much as 79 cents, or 1.5 percent, to $53.30 a barrel on the London-based ICE Futures Europe exchange. Prices are up 5% this week. Prices are up 5.2% this week.

“Oil is priced in the United States dollar, so a weaker dollar is a price cut to consumers around the world”, Bill O’Grady, chief market strategist at Confluence Investment Management in St Louis, which oversees US$3.4 billion, said by phone.

It isn’t going to get a lot better for OPEC in 2018, either.

OPEC kingpin Saudi Arabia and non-member Russian Federation, the world’s top two oil producers, have agreed on the need to keep the current cut in place until March 2018. Algeria, which was instrumental in crafting Opec’s historic output deal past year, has cut production by 55,000 barrels a day, according to Boutarfa, who sees field maintenance in May and June trimming its output by a further 15 per cent.

The US, from being one of the biggest importers of oil is now an exporter.

Further, countries like Nigeria and Libya, who were exempt from the deal, are likely to ramp up the oil production sharply as their financial and geo-political conditions improve, offsetting the impact of the production cuts by the other cartel members.

Still, there are signs that Saudi Arabia, OPEC’s largest producer, is keeping markets well supplied.

Brent futures could move into a price structure called backwardation – where later contracts trade at a discount to earlier ones – in the second half of this year if Opec extends its cuts, according to Bank of America Corp.

In order to achieve the target of reducing these stocks to their five-year average over an extended nine-month period of supply cuts, BMI said that inventory drawdowns would have to average 25.6 million barrels per month in the three last quarters of the year.

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