Oil is on its longest rising streak in more than a month as a proposal by the world’s two biggest crude producers to extend output curbs into 2018 boosted confidence that other nations will follow suit.
Futures climbed for a fifth day in New York, extending a 2.1 per cent jump on Monday after the Saudi and Russian energy ministers said they favoured extending curbs until the end of March.
The willingness to prolong the cuts, aimed at easing a global glut, is likely to sway other countries to do the same, according to Goldman Sachs Group.
US stockpiles probably slid for a sixth week, according to a Bloomberg survey before a government report on Wednesday.
The largest of the 24 producers that agreed to a deal to cut supply for six months starting in January are reaffirming their commitment to the agreement amid growing doubts over its effectiveness so far.
There’s still concern that a surge in US production, together with an increase in Libyan output and signs of recovery in Nigeria, may undercut Opec’s strategy to stabilise the market and prop up prices.
"The comments from Saudi Arabia and Russia are driving prices up but I'm sceptical that crude will see a new level," Hong Sung Ki, a commodities analyst at Samsung Futures, said by phone in Seoul. "As producers in the US are expected to increase output, prices will continue to be restricted from rising."
‘Modest’ rally
West Texas Intermediate for June delivery climbed 17 cent, or 0.4 per cent, to $49.02 a barrel on the New York Mercantile Exchange in Hong Kong.
The contract rose $1.01 to close at $48.85 on Monday, the highest since April 28th. Total volume traded was about 5 per cent below the 100-day average.
Brent for July settlement gained 15 cents to $51.97 a barrel on the London-based ICE Futures Europe exchange. The contract added 98 cent, or 1.9 per cent, to settle at $51.82 a barrel on Monday. The global benchmark crude traded at a $2.65 premium to July WTI.
The Saudi-Russia announcement on Monday will probably extend a price rebound that began last week, although the rally is “modest” compared with the increase when Opec cuts were first agreed to late last year, Goldman Sachs analysts said in a report.
US crude stockpiles are forecast to have declined by 2.75 million barrels to 519.8 million barrels in the week ended May 12th, according to a Bloomberg survey of analysts.
Supplies of gasoline probably dropped one million to 240 million barrels, while inventories of distillate fuel, a category that includes diesel and heating oil, slipped 1.25 million to 147.5 million barrels last week.
– Bloomberg
