(Bloomberg) -- Oil closed above $46 a barrel as Saudi Arabia and Russia sought to appease growing skepticism that a supply glut is going away soon.
Futures edged up in New York on Monday after a rout last week erased the rally that followed OPEC's deal to cut production in November. Saudi Arabia's energy minister Khalid Al-Falih said that, while the rebound in U.S. production has slowed OPEC's efforts, the group is working to extend cuts at least through the end of the year and possibly into 2018. Russia is ready to support extending the deal beyond 2017, the nation's Energy Ministry said.
Oil is down about 14 percent for the year after OPEC-driven optimism fizzled out as shale drillers keep adding rigs and U.S. production has been rising every week since mid-February. The Organization of Petroleum Exporting Countries will meet May 25 to decide whether to extend supply cuts through the second half of the year.
Comments from Saudi Arabia and Russia may help to support the market leading up to the meeting, but confirmation of a deal extension is needed before a significant rebound, Bart Melek, the head of global commodity strategy at TD Securities in Toronto, said by telephone. “Until it's done and we start seeing it in inventory data form in the real world, traders aren't going to get overly excited about this.”
West Texas Intermediate for June delivery rose 21 cents to settle at $46.43 a barrel on the New York Mercantile Exchange after fluctuating between gains and losses. Total volume traded was about 26 percent above the 100-day average.
Different Scenarios
Brent for July settlement climbed 24 cents to end the session at $49.34 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.50 to July WTI.
Ministers from some OPEC countries have discussed the possibility of deepening their output cuts, yet no consensus has been reached, according to delegates who asked not to be identified.
Producers are studying different scenarios for extending the cuts, and Kuwait supports all efforts to stabilize oil markets, Kuwait's Oil Minister Issam Almarzooq said. The global oil market will soon rebalance and return to a “healthy state,” Al-Falih said at the Asia Oil and Gas Conference on Monday.
Saudi Arabia and Russia's comments are “very minor bullish pressure. If they come up with some kind of formal agreement and other countries sign off on it, that would be more meaningful,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. “But right now, it's something that hasn't been done and it's still off into the future.”
Money managers cut bets on rising WTI prices by 20 percent in the week ended May 2 to the lowest level since November, according to U.S. Commodity Futures Trading Commission data on Friday. Net-long positions in Brent oil also declined.
Oil-market news:
- U.S. crude stockpiles are forecast to have fallen 2 million barrels last week, according to the the median estimate in a Bloomberg survey of eight analysts.
- Investors poured about $193.6 million into the VelocityShares 3x Long Crude Oil ETN last week, the largest weekly inflow since early March, data compiled by Bloomberg shows.
- Libya is pumping the most oil since October 2014 as the OPEC member restores output amid progress in mending the nation's political divisions.
--With assistance from Ben Sharples and Grant Smith
To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.
To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Carlos Caminada, Stephen Cunningham
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