Seoul - Oil is holding near $50 a barrel as optimism spurred
by OPEC’s output cuts confronts pessimism over rising US supply.
Futures in New York were little changed after rising 5.5
percent last week, the biggest weekly gain since December. While
OPEC Secretary-General Mohammad Barkindo said Sunday that he is
“cautiously optimistic that the market is already rebalancing” and stockpile
levels have started to ease, data on Friday showed the number of rigs drilling
for oil in the U.S. rose to the highest since September 2015.
Barkindo’s comments are bolstering confidence in the
Organization of Petroleum Exporting Countries’ commitment to drain swollen
inventories before the group meets May 25 in Vienna. Kuwait and other producers
from the group joined with non-member Oman to voice support for an extension of
the six-month deal to cut output that began in January. The effects of the
curbs have been undermined by a surge in US supply and production.
“The lower end of oil prices will be protected by OPEC’s
output-cut decision, whereas the higher end will be capped by expanding US
production,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc., said
by phone from Seoul. “While OPEC’s cuts will resonate deeper as demand starts
to pick up in the second quarter, US output may continue to rise until the third
quarter.”
West Texas Intermediate for May delivery was at $50.59 a
barrel on the New York Mercantile Exchange, down 1 cent, at 9:36 a.m. in
London. Prices gained $2.63 last week to settle at $50.60. Total volume
traded was about 40 percent below the 100-day average.
Brent for June settlement fell 5 cents to $53.48 a barrel
on the London-based ICE Futures Europe exchange. The May contract expired on
Friday after falling 0.3 percent to $52.83 a barrel. The global benchmark crude
traded at a premium of $2.40 to June WTI.
See also: OPEC deal pushes Russian oil output down 1.6
percent from peak
OPEC will be “testing the waters” in advance of the
meeting next month to find out what resonates, said Michael Poulsen, an analyst
at Global Risk Management. If the “market doesn’t react, or counter-intuitively
it drops, then they already got the answer whether it makes sense to cut
another six months,” he said.
Rigs targeting crude in the US increased for an 11th week
to 662, the longest run of gains since 2011, according to data from Baker
Hughes. American oil production expanded for a sixth week to 9.15 million
barrels a day in the week ended on March 24, the highest level since February
2016, according to Energy Information Administration data.