Oil prices moved higher after OPEC members said Thursday they were set to agree on an extension to their deal to cut crude production, one that has supported oil markets since late last year.
Members of the Organization of the Petroleum Exporting Countries said they were poised to agree to extend their efforts to cut crude-oil production through the end of June and possibly through all of 2018. The current agreement, which withholds almost 2% of global petroleum production, is set to expire in March. Still, any agreement OPEC strikes will be contingent on support from a group of producers outside the cartel led by Russia.
The oil price had drifted lower though much of the week on speculation that the oil cartel and external producers such as Russia might fail to reach a full agreement.
But OPEC is seemingly intent on delivering, analysts said Thursday.
"OPEC has managed the markets expectations extremely well and seems to be one by one slamming shut all the doors that would give reason for a move downward [in the oil price]," said Paul Horsnell, the head of commodity research at Standard Chartered.
Analysts haven't anticipated a big price response as an extension was already factored into the market. But many said there more a big downside risk should the cartel and other major producers disappoint and not agree to keep as much crude of the market for as long as anticipated. The agreement comes at a crucial juncture for an oil industry, which is in the midst of a fragile recovery.
The Russia-led delegations will meet with OPEC and are expected to hash out a final agreement later Thursday. Saudi Arabia, the quasi-leader of OPEC, had been pushing for a nine-month extension, while Russia--which isn't in the cartel but is the world's top crude producer--wants more flexibility and shorter time frames that factor in a possible ramp-up in production by U.S. shale-oil firms.
So, some analysts still foresee a deal that could include a provision to review the cuts and potentially end the agreement prematurely.
"It's clear that Russian firms do not want unconditional cuts to the end of 2018 but of course they will listen to Putin," said Bjarne Schieldrop, chief commodities analyst at SEB Markets.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--rose 0.3% to $1.74 a gallon. ICE gasoil changed hands at $559.00 a metric ton, down $2.25 from the previous settlement.
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(END) Dow Jones Newswires
November 30, 2017 07:39 ET (12:39 GMT)