Oil prices rise on talk that OPEC could extend supply cut


UPDATE 2-Oil prices rise on talk that OPEC could extend supply cut

* OPEC-led production cut was planned only for H1 2017
    * OPEC may extend cuts beyond June to help rebalance markets
    * High Brent/WTI premium opens U.S. to Asia arb opportunity

 (Adds WTI/Brent spreads, updates prices)
    By Henning GloysteinSINGAPORE, March 21 (Reuters) - Oil prices rose on Tuesday
on expectations that an OPEC-led production cut to prop up the
market could be extended, while strong demand would also work to
slowly erode a global fuel supply overhang.
    Prices for front-month Brent crude futures <LCOc1>, the
international benchmark for oil, were at $51.97 per barrel at
0746 GMT, up 35 cents, or 0.68 percent, from their last close.
    U.S. West Texas Intermediate (WTI) crude futures were up 28
cents, or 0.58 percent, at $48.50 a barrel.
    The Organization of the Petroleum Exporting Countries
(OPEC), together with other producers including Russia, has
pledged to cut its output by almost 1.8 million barrels per day
(bpd) between January and June in an effort to prop up prices
and rein in a global supply glut that has dogged markets for
almost three years.
    Yet so far the cutback has not had the desired effect as
compliance by involved exporters is patchy and as other
producers, including the United States, have stepped up to fill
the gap, resulting in crude prices falling more than 10 percent
since the beginning of the year. [nL3N1GU1GS]
    To halt the decline, OPEC members increasingly favour
extending the pact beyond June to balance the market, sources
within the group said, although they added that this would
require non-OPEC members like Russia to also step up their
efforts. [nL5N1GU2QU]
    One threat for OPEC is that other producers will fill the
gap its production cuts leave.
    With OPEC cutting but U.S. production rising, the premium of
Brent crude over U.S. WTI has risen to around $3.5 per barrel,
its highest since early 2016, potentially opening the
opportunity for U.S. oil sales to Asia, traders said.
    Eventually, however, traders said that healthy oil demand
would help rebalance markets.
    "Global demand for 2017 is expected to remain healthy and
surpass long-term average growth in demand of 1.2 million
barrels per day by between 0.2 and 0.4 million barrels per day.
As such, the combination of robust demand and weaker global
supply leading to rebalanced markets will not be de-railed by
U.S. shale oil," said Jeremy Baker, senior commodity strategist
at Vontobel Asset Management.
    Traders said that U.S. crude storage data, due to be
published later on Tuesday by the American Petroleum Institute
(API), would likely be the next significant price driver.

 (Reporting by Henning Gloystein; Editing by Richard Pullin and
Biju Dwarakanath)
 ((henning.gloystein@thomsonreuters.com; +65 6870 3263; Reuters
Messaging: henning.gloystein.thomsonreuters.com@reuters.net))

Keywords: GLOBAL OIL/ (UPDATE 2)

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