Oil held onto Friday’s gains as Saudi Arabia and Russia said they’re prepared to extend production cuts into next year to clear the global surplus.
Futures were little changed after increasing 1.5 percent on Friday, following a decline to the weakest since November. Saudi Arabia’s energy minister Khalid Al-Falih said in Kuala Lumpur that while the rebound in U.S. shale oil has slowed OPEC’s efforts, the group will likely maintain output cuts this year and possibly into 2018. Russia’s energy ministry said it supports the idea.
Oil capped a third weekly loss last week after dropping to levels last seen before the Organization of Petroleum Exporting Countries agreed in November to reduce production. OPEC will meet May 25 to decide whether to extend supply cuts through the second half of the year as concerns mount that its efforts to trim a global glut are being overwhelmed by rising U.S. supply.
“Saudi and Russia’s main objective is once again to buy some time in the strong belief that hard data is about to turn more favorable as the high demand season approaches,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “It’s the old tried and tested verbal intervention. They’re serious, but they hope it isn’t necessary.”
West Texas Intermediate for June delivery rose 1 cent to $46.23 a barrel on the New York Mercantile Exchange at 1:25 p.m. in London. Total volume traded was about 58 percent above the 100-day average. The contract gained 70 cents to $46.22 on Friday, trimming the weekly loss to 6.3 percent.
Brent for July settlement was 1 cent lower at $49.09 a barrel on the London-based ICE Futures Europe exchange after climbing as much as 1.7 percent earlier. Prices slid 5.1 percent last week. The global benchmark crude traded at a premium of $2.47 to July WTI.
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The global oil market will soon rebalance and return to a “healthy state,” Al-Falih said at the Asia Oil and Gas Conference on Monday. This is the first time the Saudi minister has suggested curbs could be extended beyond 2017.
There’s “renewed interest amid investors on the heels of Saudi Arabia’s energy minister’s comment,” said Naeem Aslam, chief market analyst at brokers Think Markets U.K. in London. Still, “what investors really want is that the current production cut by OPEC should deepen further in order for the supply glut to fade.”
China’s April crude imports fell from a record to 8.4 million barrels a day, the General Administration of Customs in Beijing said on its website. U.S. drillers added six rigs to 703 last week, the highest level since April 2015, Baker Hughes Inc. data showed Friday. Iran will go along with whatever decision OPEC makes at its meeting later this month on whether to extend oil production cuts beyond June, Oil Minister Bijan Namdar Zanganeh said Saturday. Goldman Sachs Group Inc. and Citigroup Inc. said the market is tightening and that the selloff last week to the lowest in five months wasn’t based on fundamentals.