Oil gains before US supply data as producers back longer cuts

London - Oil rose in New York before the release of US government data on oil inventories as more producers backed the extension of supply cuts to balance the market.

Futures added 0.5% in New York, reversing an earlier 1.3% loss after the American Petroleum Institute was said to report that inventories rose last week. That may contrast with government data on Wednesday, which is forecast to show a decline.

Iraq is committed to cut its share of output for an additional six months to achieve better prices, Prime Minister Haider Al-Abadi said at a news conference in Baghdad. Non-Opec nation South Sudan also backed an extension.

Oil reached a two-week high on Monday after Russia and Saudi Arabia said they’re in favor of extending output cuts for nine months as global inventories aren’t yet at the level targeted by the Organisation of Petroleum Exporting Countries (Opec) and its allies.

Prices have since moved lower amid concerns that the surge in US production will undercut Opec’s efforts. The group is scheduled to gather in Vienna on May 25.

"If Opec extends production cutbacks and maintains its production at current levels, the stock overhang based on divergence from a five-year average would have disappeared by year-end," said Carsten Fritsch, an analyst at Commerzbank in Frankfurt.

West Texas Intermediate for June delivery rose as much as 36 cents to $49.02 a barrel on the New York Mercantile Exchange, and was at $48.90 at 11:45 in London. Prices closed at $48.66 on Tuesday, falling from $48.85 on Monday, the highest close since April 28.

Total volume traded was about 32% above the 100-day average.

US inventories

Brent for July settlement added 35 cents to $52 a barrel on the London-based ICE Futures Europe exchange. The contract decreased 17 cents to settle at $51.65 a barrel on Tuesday. The global benchmark crude traded at a $2.78 premium to July WTI.

US crude stockpiles gained 882 000 barrels in the week ended May 12, the API was said to report on Tuesday. Inventories probably slid by 2.67 million barrels, falling for a sixth week, according to the median estimate in a Bloomberg survey of analysts. The nation’s drillers have boosted output to the highest level since August 2015.

Oil-market news:

Saudi Arabian Oil plans to sign agreements with at least 10 companies including General Electric and oil field-service businesses when President Donald Trump visits the kingdom, according to two people familiar with the matter.

Kuwait joined Saudi Arabia and Russia in supporting an extension of oil-output cuts by Opec and other global producers through the first quarter of 2018.