Oil at three-month low, Russia says too soon for cut-extension talks
NEW YORK (Bloomberg) -- Oil traded near a three-month low as Russia’s energy minister said it’s too early to discuss extending an output-reduction deal a day after Saudi Arabia indicated that a rollover to the second half of the year is a near certainty.
Crude was little changed in a 60-cent range. Russian Energy Minister Alexander Novak said Friday that OPEC and its partners should decide in late April or mid-May whether to extend output reductions designed to rebalance the market. Saudi Arabia is ready to extend the cuts if supplies stay above the five-year average, Energy Minister Khalid Al-Falih said Thursday on Bloomberg Television. OPEC members exceeded their pledged cuts in February, two delegates said.
Oil has settled below $50/bbl for the past six sessions, the lowest levels since November, as near- record U.S. crude stockpiles and increasing production weighed on the output reductions by the Organization of Petroleum Exporting Countries and non-OPEC producers. While markets are still struggling to clear a surge in supply from OPEC at the end of 2016, compliance with the cuts was above 90 percent for February, the International Energy Agency said this week.
“There’s a bit more producer commitment, with the idea of more producers being amicable to the fact that they may need to extend this period of output restraint beyond the initially agreed six-month period,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. “But today, we have a little bit of cold water being poured on this constructive sentiment by Russia.”
West Texas Intermediate for April delivery rose 4 cent to $48.79/bbl at 2:11 p.m. on the New York Mercantile Exchange. Prices were up 0.6% this week. Total volume traded was about 30% below the 100-day average.
Brent for May settlement gained 6 cents to $51.80/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.46 to May WTI.
'Right direction'
OPEC members and non-OPEC allies had a combined compliance rate of 94% in February, compared to 86% in January, the delegates said. Implementation by the participating OPEC members exceeded the pledged amount, they said.
Al-Falih said Thursday that he wants to signal to the market “that we’re going to do what it takes to bring the industry back to a healthy situation.” The OPEC-led cuts are moving global markets in the “right direction” and fundamentals have improved considerably, he said.
Russia trimmed its oil production by 160,000 bpd to mid-March, Novak told reporters in Moscow. The cuts will reach the planned level of 300,000 bpd in April and will remain there through the end of June.
U.S. inventories
U.S. crude inventories slid by 237,000 bbl last week to 528.2 million, according to the Energy Information Administration. Stockpiles remain near the highest level in more than three decades. The previous record of 528.4 million was set the prior week. Oil production grew for a fourth week to 9.11 MMbpd, the most since February 2016.
The U.S. oil rig count rose by 14 to 631 rigs, the highest level since September 2015, according to data published Friday by Baker Hughes Inc.
It’s likely U.S. crude inventories will increase during the rest of seasonal refinery maintenance season, Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone.
