Oil prices continued to climb to start the week, pushing futures to their highest levels in more than a month on Monday ahead of a meeting of the Organization of the Petroleum Exporting Countries.
Major oil producers will join OPEC members in Vienna on Thursday to discuss extending their 6-month-old agreement to cut production by 1.8 million barrels a day through mid-2017. There’s near-unanimity among watchers that a deal will get extended, with the only real questions being for how long and whether even more production gets reduced.
Read: 4 potential outcomes for OPEC’s crucial meeting
Sentiment regarding a new deal has helped oil rebound 10% the past two weeks.
The move, though, could be resulting in the oil market facing a buy-the-rumor, sell-the-news scenario that crude prices pull back at least somewhat regardless of what Thursday’s announcements are.
For now, bull remain firmly in charge. Light, sweet crude for July delivery
on the New York Mercantile Exchange was recently up 36 cents, or 0.7%, to $51.02 a barrel in the Globex electronic session. Brent crude
, the global benchmark, rose 34 cents, or 0.6%, to $53.95 a barrel.
“We believe global oil markets are rebalancing,” said Nomura. But the investment bank also argued that “longer supply curbs are needed to drain excess inventories built up during years of high oil prices.” It added while OPEC has been 90%-compliant with the promised cuts so far, rebalance could still be as far as 18 months away.
Gordon Kwan, head of regional energy research at Nomura, said deeper production cuts of more than 2 million barrels a day may be on the card as Saudi Arabia is showing signs of impatience with the pace of rebalancing, which is happening slowly as U.S. producers have stepped up output this year.
But a long extension, possibly a year, of the current output cuts could further encourage U.S. shale output, said Capital Economics. But even with higher U.S. supplies, the oil market under OPEC-led production caps would eventually move towards a “significant deficit.”
Nymex June gasoline futures
were recently up 0.7% at $1.6638 a gallon, diesel gained 0.8% to $1.5946 and ICE gasoil rose 0.7% to $477 per metric ton.
Source: Market Watch Personal Finance