Oil prices rose to fresh one-month highs Tuesday, extending a winning streak to five sessions on optimism that the coming OPEC meeting will result in more production cuts.
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Gains Tuesday were the 11th in 13 sessions, one of several recent, lengthy rallies largely tied to the Organization of the Petroleum Exporting Countries. Falling stockpiles this month in the U.S. have some convinced that cuts from the group of global exporters are impacting supply, and U.S. crude prices are up 13% since they hit a six-month low May 4.
Light, sweet crude for July settled up 34 cents, or 0.7%, at $51.47 a barrel on the New York Mercantile Exchange. Brent gained 28 cents, or 0.5%, to $54.15 a barrel on ICE Futures Europe.
"It's primarily OPEC as far as I'm concerned," said Bart Melek, head of commodity strategy at TD Securities in Toronto.
Saudi Energy Minister Khalid al-Falih said early Tuesday that Iraq had given the "green light" to a proposal for a nine-month extension that would be presented to OPEC's meeting in Vienna on Thursday. Iraq had become a potential obstacle to OPEC's efforts to continue cutting output into next year, representatives of the cartel said Monday, prompting Saudi Arabia's energy minister to fly to Baghdad for meetings.
Now Mr. al-Falih said he did not expect any opposition within OPEC to extending the cuts, speaking after he met his Iraqi counterpart in Baghdad. It follows the pattern of recent weeks of several countries speaking out in favor of an extension, including Russia, one of the world's biggest exporters and the largest participating country from outside of OPEC.
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"You kind of know what's out there: Nine-month extension and everybody's in," said Michael Hiley, a trader at LPS Futures LLC.
Late last year OPEC and other major producers including Russia agreed to cut output by 1.8 million barrels a day for the first half of 2017 in a bid to bring down stocks. Thursday's meeting is expected to yield an extension to the deal of up to nine months.
"OPEC were saying they want to bring down inventories and it hasn't happened yet which is why we expect an extension," said Giovanni Staunovo, analyst at UBS.
One potential hurdle to OPEC reaching consensus is agreeing on the length of the extension, with some members preferring six months. Saudi Arabia's oil minister Khalid al-Falih is in favor of a nine-month extension.
Either way, analysts said that a cut has been priced into the market. And there is a chance that OPEC leaders could announce further cuts on top of that, surprising the markets and accelerating the rally, Peter Cardillo, chief market economist at First Standard Financial in New York, said in a note.
"OPEC needs to convince the markets that it means business and is back in control," he said.
Oil prices briefly fell to losses in predawn trading after news the U.S. plans to sell some of its strategic reserves. But analysts said that will ultimately be only a small addition of supply into the market, and may not even happen soon because of how long it is likely to take to pass the plan through Congress.
Gasoline futures lost 0.12 cent, or 0.1%, to $1.6614 a gallon, snapping a three-session winning streak.
Diesel futures are on their longest winning streak since 2010. They gained 0.46 cent, or 0.3%, to $1.6067 a gallon, a 10th-straight winning session. It is at its highest settlement since April 18.
The American Petroleum Institute, a private industry group, provided weekly data late Tuesday on U.S. inventories that showed a 1.5-million-barrel decrease in crude supplies, a 3.2-million-barrel decrease in gasoline stocks and a 1.9 million-barrel decrease in distillate inventories, according to a market participant.
The U.S. government's EIA will release its official numbers on inventories Wednesday morning.
Sarah McFarlane, Riva Gold, Summer Said and Benoit Faucon contributed to this article.
Write to Timothy Puko at email@example.com
(END) Dow Jones Newswires
May 23, 2017 17:45 ET (21:45 GMT)