Brent crude rebounded after the biggest slump in six weeks as Saudi Arabia said OPEC-led supply cuts may need to be extended past June to drain bloated global crude inventories.
Prices rose as much as 1 percent in London, paring Wednesday’s 3.6 percent loss. The first three months of supply curbs have failed to bring inventories below the five-year average, Saudi Arabia’s Energy Minister Khalid Al-Falih said. Oil slid on Wednesday by the most since March 8 as expanding US output offset shrinking crude stockpiles, which fell for a second week after reaching a record.
“OPEC has no choice but to continue to maintain the cut,” Anas Al Hajji, an independent oil analyst, said in a Bloomberg television interview. “US production increased substantially and it’s going to continue to increase. OPEC needs to cut just to maintain prices — the story is no longer about increasing prices.”
Oil has closed lower every day this week, after posting its third weekly gain Friday amid optimism the Organization of Petroleum Exporting Countries will extend supply curbs. OPEC will make a decision on whether to prolong the deal at its official ministerial meeting in Vienna on May 25, Secretary-General Mohammad Barkindo said in Abu Dhabi.
Brent for June settlement climbed as much as 55 cents to $53.48 a barrel on the London-based ICE Futures Europe exchange and was at $53.38 at 10:37 a.m. in London. Prices slid $1.96, or 3.6 percent, to $52.93 on Wednesday. The global benchmark traded at a premium of $2.13 to June West Texas Intermediate.
WTI for May delivery, which expires Thursday, added as much as 48 cents, or 1 percent, to $50.92 a barrel on the New York Mercantile Exchange. Total volume traded was about 9.6 percent above the 100-day average. The contract lost $1.97 to $50.44 on Wednesday, the lowest close since April 3. The more active June futures gained 39 cents to $51.24.
For a Gadfly column about investors not buying the rebound story, click here.
US crude production rose by 17,000 barrels a day to 9.25 million a day, the Energy Information Administration said in a report Wednesday. Output has climbed for nine weeks. Nationwide crude stockpiles dropped by 1.03 million barrels to 532.3 million. They were forecast to decrease by 1.4 million, according to a Bloomberg survey.
Russia is likely to support prolonging the OPEC-led cuts with other nations, according to a Bloomberg survey. Iran will probably be allowed to keep its oil production unchanged if OPEC decides to extend the agreement, Kuwait Oil Minister Issam Almarzooq said.