Oil rebounds as output-cut leaders pledge continuation of deal

Brent crude futures settled at $66.44 a barrel, down 0.9 percent, or 58 cents. U.S. West Texas Intermediate (WTI) crude futures settled at $59.64 a barrel, down 33 cents, or 0.6 percent. The previous day, Brent broke through $67 for the first time since June 2015 and WTI rose above $60 a barrel for the first time since May 2015.

HONG KONG: Brent oil advanced after its first weekly slump since mid-December as Saudi Arabia and Russia pledged supply cuts will continue while some banks predict the deal may end early.

Futures rose 0.4% in New York after sliding 1.8% last week. Output limits should remain through 2018 as rebalancing may be achieved next year, Saudi Arabia’s Energy Minister Khalid Al-Falih said in a Bloomberg television interview held with his Russian counterpart on Sunday. 

Russia is prepared to cooperate with OPEC after the current curbs expire, Energy Minister Alexander Novak said. Neither minister said if the cuts would continue in 2019.

Brent has eased after supply curbs by the Organization of Petroleum Exporting Countries and its allies to reduce a global glut pushed prices above US$70 for the first time since December 2014. Banks including Citigroup Inc. and JPMorgan Chase & Co. predict the coalition may begin winding down cuts from the middle of the year, before a scheduled end in December, as the market re-balances.

“The commitment to continuing cuts will keep the oil price elevated through the year,” said David Lennox, a commodity analyst at Fat Prophets in Sydney. “OPEC’s compliance to the deal has been excellent. The only cap on a further rally will be the reaction from U.S. producers to higher prices.”

Brent for March settlement was at US$68.85 a barrel on the London-based ICE Futures Europe exchange, up 24 cents, at 12:46 p.m. in Hong Kong. The contract closed 1% lower at US$68.61 on Friday, falling for a second day. The global benchmark traded at a premium of US$5.37 to March West Texas Intermediate.

WTI for February delivery, which expires Monday, was at US$63.57 a barrel on the New York Mercantile Exchange, up 20 cents, after falling 1.5% last week. Total volume traded was at about 8% below the 100-day average. The more-active March contract rose 17 cents to US$63.48.

OPEC and its allies see merit in maintaining their output limits into 2019, Oman Oil Minister Mohammed Al Rumhy told reporters before a meeting to assess compliance to the accord. The compliance rate among all participants in 2018 will beat the 107 percent average in 2017, Al-Falih said.

U.S. drillers last week trimmed the number of rigs targeting crude for a second time this month, according to data from Baker Hughes on Friday. The count dropped by 5 to 747. - Bloomberg
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