Crude set for weekly gain as Saudis willing to extend curbs

Ben Sharples and Grant Smith March 17, 2017

HONG KONG (Bloomberg) -- Oil headed for a weekly increase as U.S. stockpiles retreated from record levels while Saudi Arabia said it’s prepared to continue production curbs in the second half of the year.

Futures were little changed in New York, up 0.9% for the week. U.S. inventories last week fell for the first time this year, according to EIA data on Wednesday. Output curbs by OPEC and its partners may continue past June if global stockpiles remain above the five-year average, according to Saudi Arabia’s Energy Minister Khalid Al-Falih.

Oil last week broke below $50/bbl for the first time since December as rising U.S. output countered production curbs by OPEC and other nations. While markets are still struggling to clear a surge in supply from OPEC at the end of 2016, compliance with the cuts remains above 90%, the IEA said.

“The recovery at this stage remains fragile,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “The market managed to find support at key levels following a small drop in U.S. crude inventories. We are very likely to see an extension to the current production-cut deal if the aim is to bring stocks down to the five-year average.”

WTI for April delivery was at $48.89/bbl on the NYME, up $0.14, in London. Total volume traded was about 45% below the 100-day average. Prices fell $0.11 to $48.75 on Thursday after surging 2.4% the previous session.

U.S. Stockpiles

Brent for May settlement rose $0.11 to $51.85/bbl on the London exchange. The contract on Thursday fell $0.07 to $51.74. Brent traded at a premium of $2.46 to May WTI.

U.S. crude inventories dropped by 237,000 bbl last week to 528.2 million barrels, according to the EIA. Stockpiles remain near the highest level in more than three decades. Oil production expanded for a fourth week to 9.1 MMbpd, the most since February 2016.

Oil-Market News

The OPEC-led cuts are moving global markets in the “right direction” and fundamentals have improved considerably, Al-Falih said in a Bloomberg interview in Washington. BP is in talks with Ineos AG to sell the Forties pipeline, one of the most-important pieces of oil infrastructure in the U.K.’s North Sea.