Oil summits $50 barrel level for first time in May
New York/London — Oil is back above $50 a barrel in New York for the first time in May on growing confidence that Opec will maintain its efforts to diminish a global glut.
Futures advanced as much as a 1.8% in New York, heading for the biggest weekly gain since March. Oil cartel Opec and its allies will probably prolong their agreement at least until the end of the year, according to a Bloomberg survey of analysts this week.
Most members support a proposal by Saudi Arabia and Russia to extend supply cuts for nine months, Algerian energy minister Noureddine Boutarfa said Thursday.
Opec and its partners will meet on May 25 in Vienna to decide whether to prolong their supply cuts past June. Several members have voiced support for the proposal to extend curbs after Russia and Saudi Arabia said global inventories haven’t yet fallen to targeted levels.
Meanwhile, production in the US has been increasing, threatening to derail the group’s goal.
"The focus is intensifying on what Opec will do next," John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said by telephone. "The prospect of longer cuts and a larger size are like a shiny object dangling in the sea." West Texas Intermediate for June delivery rose 88 US cents, or 1.5%, to $50.23 a barrel at 9.59am on the New York Mercantile Exchange. Futures touched $50.25, the highest since April 21. Prices are up 5% this week. Total volume traded was about 10% above the 100-day average.
Brent for July settlement increased 98c, or 1.9%, to $53.49 a barrel on the London-based ICE Futures Europe exchange. Prices are up 5.2% this week. The global benchmark crude traded at a $2.94 premium to July WTI.
Algerian proposal Algeria, which was instrumental in crafting Opec’s historic output deal last year, has cut production by 55,000 barrels a day, according to Boutarfa, who sees field maintenance in May and June trimming its output by a further 15%.
The country is also proposing to set up a high-level committee of experts to advise Opec and nonOpec ministers on extending or curtailing the curbs, he said.
"Opec ministers likely will continue to talk oil higher, there is more chatter on the discussion and that means there will be more volatility in prices," said Giovanni Staunovo, an analyst at UBS in Zurich. "We still expect prices to move to $60 over the coming months because the oil market will be in a deficit as supply growth will lag demand growth."
Opec’s economic commission board, a panel of representatives from member countries, is considering the implications of various scenarios including extended production cuts, deeper supply reductions and the expiration of the curbs in June, according to a delegate familiar with the matter.