Oil extends gain towards $51 as Saudi sees output curbs into 2018

Bloomberg

Oil extended gains towards $51 a barrel as Saudi Arabia said all producers participating in output cuts agree on prolonging the deal through the first quarter of 2018.
Futures climbed as much as 1.1 percent in New York after advancing 5.2 percent last week, the biggest weekly increase since March. An extension into next year will help producers reach their goal of trim-
ming stockpiles in developed economies to the five-year average, Saudi Arabia’s Energy Minister Khalid Al-Falih said. In the US, drillers targeting crude added rigs for an 18th week.
Oil has climbed as Saudi Arabia and non-OPEC member Russia rally support for a nine-month extension to the output-cut deal by the Organization of Petroleum Exporting Countries and its
allies. While stubbornly high global inventories have taken longer than expected to drain, signs that US supplies are starting to ease is adding to optimism. OPEC and its partners meet in Vienna on Thursday.
“OPEC and some non-OPEC producers are highly likely to maintain cuts for another six to nine months and this is likely to drive global oil inventories down towards normal at the end of 2017,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “But if the US market keeps adding 30 rigs a month till then, production is likely to grow by 2.3 million barrels a day, putting a downside price risk on 2018 and 2019.”
West Texas Intermediate for June delivery, which expires on Monday, rose as much as 56 cents to $50.89 a barrel on the New York Mercantile Exchange. Total volume traded was about 19 percent above the 100-day average. The more-active July contract gained 39 cents to $51.06 at 9:09 a.m. in London.

CUT EXTENSION
Brent for July settlement climbed as much as 56 cents, or 1 percent, to $54.17 a barrel on the London-based ICE Futures Europe exchange. Prices rose 5.5 percent last week. The global benchmark crude traded at a premium of $2.93 to July WTI.
Iraq’s Oil Minister Jabbar Al-Luaibi said almost all countries participating in the cut had agreed to extend it, though there was no consensus yet on how long the extension should be. “Some ministers say nine months, some ministers think six months,” Al-Luaibi said in an interview in Jordan. Iraq is OPEC’s largest producer after Saudi Arabia.
Iraq’s Rumaila oil-field output seen at about 1.45 million barrels a day, operator BP Plc’s manager for the country Zaid Elyaseri said. The Iraqi government will decide at which fields to reduce output, but Rumaila’s low cost means it makes sense to cut elsewhere. Lukoil PJSC has seen no impact on its Iraqi West Qurna field so far from OPEC output cuts, company’s Middle East head Gati Al-Jebouri said in London.
BP and its partners started production at the Quad 204 project in the UK North Sea that will produce at a peak rate of 130,000 barrels a day this year, according to an emailed statement. Rigs targeting crude in the US are on the longest run of gains since August 2011, and climbed by eight to 720, according to data from Baker Hughes Inc.