Brent crude oil approaches $60 as markets tighten

Saturday, 28 October 2017 00:00 - - {{hitsCtrl.values.hits}}

London (Reuters): Oil prices steadied on Friday, with benchmark Brent crude trading just below $60 a barrel, buoyed by comments from Saudi Arabia’s crown prince backing the extension of OPEC-led output cuts.

Brent LCOc1 was unchanged at $59.30 by 0840 GMT, after Thursday’s rise to $59.55, its highest since 2015 July. The contract is more than 30% above 2017 lows touched in June.

U.S. light crude oil CLc1 was down 4 cents at $52.60 but still 25% above its June 2017 low. U.S. crude prices have been capped by rising U.S. production.

“Oil raced higher overnight with Brent finishing in sight of the magical $60 a barrel mark, spurred on by Saudi remarks supporting the oil production cut through to the end of 2018,” said Jeffrey Halley, senior analyst at futures brokerage OANDA.

Saudi Arabia’s Crown Prince Mohammad bin Salman told Reuters on Thursday the kingdom would support extending the output cut in a bid to stabilise oil demand and supply.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers including Russia have pledged to reduce their production by around 1.8 million barrels per day (bpd) until the end of March to drain a global supply glut.

OPEC is expected to discuss extending that agreement at a meeting in Vienna on Nov. 30.

“If OPEC and their non-OPEC partners can agree to extend their production curtailments through 2018, then we estimate the oil market will remain in modest under-supply until 2019,” U.S. Investment bank Jefferies said.

Oil prices have hovered near their highest for this year in recent weeks amid signs of a tightening market, talk of an extension of production cuts and worries over conflict in Iraq.

“The ingredients are there for the current uptrend to take the European crude benchmark above $60 a barrel,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

“Those placing their betting chips on an imminent breakout above $60 will take heart from tightening oil market fundamentals,” Brennock said. “A solid global demand backdrop coupled with OPEC-led cuts is eating into the oil glut.”

However, rising U.S. crude production remains an issue for OPEC as it strives to clear a global overhang.

U.S. crude production C-OUT-EIA rose by 1.1 million bpd to 9.5 million bpd in the week ended Oct. 20, according to U.S. Energy Information Administration (EIA) data.