Oil prices rose Friday to a one-month high on some of their largest one-day gains of the year.
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Renewed optimism about output cuts from the world's biggest exporters and the possibility they will be extended at next week's OPEC meeting caused U.S. crude's first surge above $50 a barrel since late April. Crude markets are now up nearly 11% in just two weeks, largely inspired by long-awaited declines in U.S. crude stockpiles and bets that they are the result of OPEC's effort to ease a glut.
Light, sweet crude for June delivery settled up 98 cents, or 2%, at $50.33 a barrel on the New York Mercantile Exchange. U.S. crude has gained more than 2% only seven times in 2017. Brent crude, the global benchmark, gained $1.10, or 2.1%, to $53.61 a barrel on ICE Futures Europe.
Friday's gains were the ninth in 11 sessions, a sharp turnaround since falling to a five-month low early this month. That led U.S. oil to gains of 5.2% for the week, the biggest since the last week of March. And Brent rose 5.4%, its best week in six months.
This is the market's third push above $50 a barrel since the Organization of the Petroleum Exporting Countries and other major exporters including Russia agreed in November to cut production by 1.8 million barrels a day for the first six months of this year. While that has failed to lower historically high stockpiles or rally prices as much as many expected, a recent push to extend the deal has revived bullish expectations. Many traders now expect those producers to cut output through next winter.
"Today is just the optimism: We're getting closer, people think it can actually happen," said Ryan McKay, commodity strategist at TD Securities in Toronto.
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There were few new headlines to rally the market Friday, several people said. But recent bullish trends are still going.
Many spot markets are stronger, suggesting the OPEC cuts are having an effect and making supply a little harder to come by, said Scott Shelton, a broker at ICAP PLC. And the recent shift in momentum gets accelerated by systematic trading programs, which now appear to be buying again after a long period of selling, Mr. Shelton said.
"The markets are really starting to see the effects of the cuts. People are really starting to struggle for barrels," Mr. Shelton said, though he cautioned that there are signs of rising production too. "There are a lot of fits and starts."
Bank of America Merrill Lynch pointed out that OPEC is struggling to bring down global stocks but that the cartel's own strong production in the fourth quarter, ahead of the cuts, has made it harder to achieve its goal.
"And for OPEC to impress the market, they might need to do more," said Richard Mallinson, an analyst at consultancy Energy Aspects. For instance, the group may consider a bigger cut, Mr. Mallinson said.
Gasoline futures gained 4.60 cents, or 2.9%, to $1.6523 a gallon -- the highest settlement since April 20. The futures added 7.62 cents, or 4.8%, for the week.
Diesel futures rose 3.74 cents, or 2.4%, to $1.5827 a gallon. The futures climbed 8.94 cents, or 6%, for the week -- the best week since the one that ended Dec. 2.
--Sarah McFarlane and Biman Mukherji contributed to this article.
Write to Timothy Puko at email@example.com
(END) Dow Jones Newswires
May 19, 2017 16:33 ET (20:33 GMT)