Oil holds gains as producers say market rebalancing
Oil prices stood little changed on Monday, keeping most of their gains from the previous session to hold near their highest levels in months, as major producers meeting in Vienna said the market was well on its way towards rebalancing.
The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day since the start of 2017, helping lift oil prices by about 15 percent in the past three months.
Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday’s meeting of the Joint Ministerial Monitoring Committee, said supply cuts were helping cut global crude inventories to their five-year average, OPEC’s stated target.
London Brent crude for November delivery was down 3 cents at $56.83 a barrel by 0304 GMT, near the highest since March. U.S. crude for November delivery was down 8 cents at $50.58, having risen 0.2 percent on Friday.
Russia’s energy minister said no decision on extending output curbs beyond the end of March was expected before January, although other ministers suggested such a decision could be taken before the end of this year.
“There is still ample time to decide for producers whether to extend output curbs beyond March,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.
“Oil is relatively underpriced compared with other markets, but any steep rise would be offset by rising shale oil production.”
Attempts to curb supply have faced rising U.S. shale oil output. U.S. energy firms cut the number of oil rigs operating for a third week in a row as a 14-month drilling recovery stalled as companies pared back on spending plans.
Hedge funds boosted bullish wagers on U.S. crude oil to the highest level in one month, data showed.
Elsewhere, Nigeria is pumping below its agreed output cap, its oil minister said.
Oil also came under pressure from the dollar’s rise against euro after Germany’s election showed surging support for a far-right party that left Chancellor Angela Merkel scrambling to form a governing coalition.
Markets were also nervously eyeing developments in North Korea. U.S. Treasury Secretary Steve Mnuchin on Sunday said President Donald Trump wants to avoid nuclear war with North Korea and “will do everything we can” to avoid conflict.
Trump has dialled up the rhetoric against North Korea over the weekend, warning the country’s foreign minister that he and leader Kim Jong Un “won’t be around much longer,” as Pyongyang staged a major anti-U.S. rally.