Oil inches up on talk of output-cut deal extension, ahead of U.S. supply update
Oil traded mostly higher Tuesday, buoyed by talk among major producers to extend their production-cut deal, but expectations for a weekly rise in U.S. crude supply left prices vulnerable to losses.
May West Texas Intermediate crude CLK8, -0.55% added 4 cents, or less than 0.1%, to $65.59 a barrel on the New York Mercantile Exchange. The contract has been confined to small changes since it settled at $65.88 Friday, the highest finish for a front-month contract since Jan. 26, according to FactSet data. It rose roughly 5.6% for last week.
May Brent crude LCOK8, -0.24% rose 11 cents, or 0.2%, to $70.23 a barrel on ICE Futures Europe. The front month contract has traded mostly above $70 a barrel since clearing that marker on Friday for the first time since late January.
Saudi Crown Prince Mohammed bin Salman told Reuters in an interview that Saudi Arabia and Russia were considering a long-term extension of their deal to curb production.
“We are working to shift from a year-to-year agreement to a 10-20 year agreement,” the crown prince told Reuters, according to a news report published Tuesday.
Strong compliance with the Organization of the Petroleum Exporting Countries’ agreement to hold back crude output by 1.8 million barrels a day has supported prices. OPEC and 10 producers outside the cartel, including Russia, have been curbing production since the start of last year in an effort to rein in a supply glut.
Meanwhile, several countries will be running out of oil supply, according to Saudi Finance Minister Mohammed al-Jadaan, in a separate interview on Fox Business Tuesday.
“This raises the question of the backlash from underinvestment over the last few years,” said Phil Flynn, senior market analyst at Price Futures Group. “We have seen a lack of investment in many countries, so new supply coming on line will take money and time. Venezuela’s has plenty of reserves but no new supply.”
Read: How Venezuela could be the ‘final element’ that tips oil market into deficit
The Islamic Republic also was in focus amid concerns about U.S. policy toward Iran, which some strategists believe “clearly raises the likelihood of oil trade disruptions and with it upside risks to oil prices in the near term,” said Ehsan Khoman, head of research for the Middle East at Bank of Tokyo-Mitsubishi UFJ, in a note Tuesday.
A withdrawal by the U.S. from a 2015 international agreement to curb Tehran’s nuclear program would result in the reimposition of economic sanctions on Iran.
In such a scenario, “at minimum, we view that 250,000 to 350,000 barrels a day of Iranian crude is at risk of being disrupted,” Khoman said.
Oil traders were also looking ahead to weekly U.S. inventory data, due out Wednesday from the Energy Information Administration. Trade group the American Petroleum Institute releases its own figures late Tuesday.
Analysts polled by S&P Global Platts expect the EIA to report a rise of 1 million barrels in domestic crude supplies for the week ended March 23. They also forecast supply declines of 2 million for gasoline and 1.9 million for distillates.
On Nymex, April gasoline RBJ8, -0.28% traded flat at $2.011 a gallon, while April heating oil HOJ8, +0.15% was up 0.5% to $2.025 a gallon.
April natural gas NGJ18, +0.95% was up 0.6% at $2.633 per million British thermal units, ahead of the contract’s expiration at the day’s settlement.
Commodity Futures Trading Commission