Crude futures edged higher Monday, amid expectations that major producers will cut their supplies for longer in a bid to reduce high global inventories.
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Prices were supported by comments from Saudi Arabia's Energy Minister Khalid Al-Falih, who Monday said he was confident production cuts led by the Organization of the Petroleum Exporting Countries will be extended into the second half of the year or even longer. The election of Emmanuel Macron, a pro-free trade centrist, as France's next president also helped to assuage concerns that the European economy may see further headwinds.
U.S. crude futures rose 21 cents, or 0.45%, to $46.43 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 24 cents, or 0.49% to $49.34 a barrel on ICE Futures Europe.
Oil prices have fallen more than 5% in the last week and are still hovering around their lowest levels since November, before OPEC and other major producers struck their production cut agreement.
The selling pressure last week was ignited by concerns that global oil stocks weren't falling as quickly as was hoped, especially amid relentlessly rising U.S. output. But prices rose Friday and Monday, leading some investors to believe the selloff is finished.
"I think the market is going to recover. This is the heavy demand season -- we shouldn't really be going down," said Mark Waggoner, president of Excel Futures.
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Mr. Waggoner said he believes oil prices will soon be on their way up. Once oil futures hit about $47.20, he's likely to start buying, he said.
"Personally, I think the bottom is in," he said.
OPEC and other major producers including Russia agreed to cut production by 1.8 million barrels a day in the first half of the year in an attempt to drain large global stocks. The cartel is due to meet on May 25 to decide whether to curb output for longer, and market participants are increasingly banking on the group to extend the cuts.
"The oil cartel will be committing commercial suicide if it fails to extend output cuts and provide the energy complex with a much-needed pillar of price support," analysts at the brokerage PVM wrote in a research note. "As such, the OPEC meeting scheduled for May 25 is increasingly shaping up as a 'now or never' moment for the organization."
Given that, some analysts said that investors have become overly negative.
"Sentiment on the oil market is meanwhile worse than the fundamental situation," analysts at Commerzbank wrote in a research note. Inventories are falling and an extension of OPEC's production cuts would likely lead to tighter supplies in the second half of the year, they said.
"Even rising U.S. oil production would do nothing to change this," the analysts wrote.
Gasoline futures rose 1.32 cents, or 0.88%, to $1.5178 a gallon. Diesel futures rose 1.9 cents, or 1.32%, to $1.4556 a gallon.
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(END) Dow Jones Newswires
May 08, 2017 15:46 ET (19:46 GMT)