Oil Caps Biggest Weekly Gain in 2017 as OPEC Eyes Deal Extension

(Bloomberg) -- Oil capped its biggest weekly increase this year amid speculation OPEC will extend its deal to curb output and ease a global glut.

Futures advanced 5.5 percent in New York this week, climbing back above $50 a barrel after Kuwait Oil Minister Issam Almarzooq reiterated support for prolonging a six-month deal to trim supply past June. The market also rose after a U.S. government report showed the nation's refineries boosted crude use by the most in almost three years while fuel supplies fell. Still, prices are down about 6 percent for the first three months of 2017, the biggest quarterly loss since late 2015.

The latest comments from Kuwait's oil minister are bolstering confidence in the Organization of Petroleum Exporting Countries' commitment to drain swollen stockpiles ahead of the group's next formal ministerial meeting on May 25 in Vienna. Five producers from the group joined with non-member Oman on Sunday to voice support for an extension. Optimism over the cuts had wavered recently amid a surge in U.S. supply and production.

"There's renewed hope that OPEC and non-OPEC producers will improve adherence and extend the production cuts," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. "This week's inventory report sets us up for a more balanced future because of the rise in refinery runs and drops in product stocks."

West Texas Intermediate for May delivery rose 25 cents, or 0.5 percent, to $50.60 a barrel at on the New York Mercantile Exchange. It's the highest close since March 7. Total volume traded was about 19 percent below the 100-day average. Prices slipped 6.2 percent this month, the biggest slide since July.

Cut Extension

Brent for May settlement, which expired Friday, slipped 13 cents to $52.83 a barrel on the London-based ICE Futures Europe exchange. The contract rose 4 percent this week. The global benchmark crude closed at a $2.23 premium to WTI. The more-active June contract rose 40 cents to $53.53.

See also: Gulf of Mexico revival along with U.S. shale oil is OPEC hurdle

Kuwait and fellow OPEC members Iraq, Venezuela, Angola and Algeria backed an extension of the agreement to cut output while meeting in Kuwait City over the weekend to discuss compliance with the pledged reductions. The supply curbs are gradually restoring the market to balance, the group's Secretary-General Mohammad Barkindo said in a statement this week.

Russia is moving ahead with its own reductions to curb a glut. “It's important to accomplish last year's deal first,” Russia's Energy Minister Alexander Novak said before last weekend's meeting. The country will target its pledged reduction of 300,000 barrels a day by the end of April, he said. The nation cut crude output by an average 202,000 barrels a day in March, according to the Energy Ministry. The curbs are from the October totals. 

Oil-market news:

• Oil output in West Texas is about to outgrow pipeline capacity, a combination that reduced crude prices in the region three years ago.
• Drillers added rigs targeting crude in the U.S. for an 11th week, the longest uninterrupted stretch of additions since 2011, Baker Hughes Inc. data showed.
• PetroChina Co. plans to raise spending for the first time in five years as the country's biggest oil and gas producer seeks to move on after posting its lowest-ever profit.

--With assistance from Grant Smith

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Jim Efstathiou Jr., Susan Warren