Oil slips towards $50 on doubts over output-cut extension - SapForex24

Oil fell further towards $50 a barrel on Monday, pressured by uncertainty over whether an OPEC-led production cut will be extended beyond June in an effort to counter a glut of crude.

A committee of ministers from OPEC and outside producers agreed on Sunday to look at prolonging the deal, stopping short of an earlier draft statement that said the committee recommended keeping the measure in place.

International benchmark Brent crude was down 34 cents at $50.46 by 0822 GMT, after falling as low as $50.26. U.S. crude was down 44 cents at $47.53.

"We would see the relative lack of reaction in the price perhaps as a reflection of some disappointment that nothing more concrete was forthcoming," analysts at JBC Energy said in a report, referring to the conclusion of Sunday's talks.

A number of ministers from the Organization of the Petroleum Exporting Countries and other producers met in Kuwait to review the progress of their supply cut, which initially runs until the end of June.

OPEC and 11 other producers including Russia agreed in December to reduce their combined output by almost 1.8 million barrels per day (bpd) in the first half of this year, to support prices and curb oversupply.

While many in OPEC have called for prolonging the curbs, Russia has been less definitive. Energy Minister Alexander Novak said on Sunday it was too early to say whether there would be an extension.

There is "increasing scepticism" in the market as to whether a rollover of the cuts can be agreed, JBC added.

Oil also came under pressure from further evidence that higher prices as a result of the OPEC-led supply cut are helping boost supplies in the United States.

U.S. drillers added oil rigs for a 10th week in a row, data from energy services firm Baker Hughes showed on Friday, as energy companies boost spending on new production.

Because of higher U.S. output and the cuts by OPEC, the discount of U.S. crude to Brent has grown to around $2.90 per barrel, heading for its widest close since late 2015.

Despite ample inventories and rising U.S. output, Goldman Sachs (NYSE:GS) said the market was rebalancing and it may not be necessary to keep output curbed unless supply-and-demand fundamentals worsen.

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Oil prices rise on talk that OPEC could extend supply cut- SapForex24

Oil prices rose on Tuesday on expectations that an OPEC-led production cut to prop up the market could be extended, while strong demand would also work to slowly erode a global fuel supply overhang.

Prices for front-month Brent crude futures, the international benchmark for oil, were at $51.86 per barrel at 0401 GMT, up 24 cents, or 0.5 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were up 13 cents, or 0.3 percent, at $48.35 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC), together with other producers including Russia, has pledged to cut its output by almost 1.8 million barrels per day (bpd) between January and June in an effort to prop up prices and rein in a global supply glut that has dogged markets for almost three years.

Yet so far the cutback has not had the desired effect as compliance by involved exporters is patchy and as other producers, including the United States, have stepped up to fill the gap, resulting in crude prices falling more than 10 percent since the beginning of the year.

To halt the decline, OPEC members increasingly favor extending the pact beyond June to balance the market, sources within the group said, although they added that this would require NON-OPEC members like Russia to also step up their efforts.

Traders also said that healthy oil demand would help rebalance markets and support prices.
"Global demand for 2017 is expected to remain healthy and surpass long-term average growth in demand of 1.2 million barrels per day by between 0.2 and 0.4 million barrels per day.

 As such, the combination of robust demand and weaker global supply leading to rebalanced markets will not be de-railed by U.S. shale oil," said Jeremy Baker, Senior Commodity Strategist, at Vontobel Asset Management.

Baker said this would "support the case for a shift from contango to backwardation in the crude markets during the second-half 2017."

Contango describes a market structure in which prices for future delivery of a product are higher than current ones, while backwardation is price curve in which spot prices are more expensive than future deliveries.

Traders said that U.S. crude storage data, due to be published later on Tuesday by the American Petroleum Institute (API), would likely be the next significant price driver.

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