Oil rebounds as output-cut leaders pledge continuation of deal

Hong Kong - Brent oil advanced after its first weekly slump since mid-December as Saudi Arabia and Russia pledged supply cuts will continue while some banks predict the deal may end early.

Futures rose 0.4% in London after sliding 1.8% last week. Output limits should remain through 2018 as rebalancing may be achieved next year, Saudi Arabia’s Energy Minister Khalid Al-Falih said in a Bloomberg television interview held with his Russian counterpart on Sunday.

Russia is prepared to cooperate with OPEC after the current curbs expire, Energy Minister  Alexander Novak said. Neither minister said if the cuts would continue in 2019.

Brent has eased after supply curbs by the Organisation of Petroleum Exporting Countries and its allies to reduce a global glut pushed prices above $70 for the first time since December 2014. 

Banks including Citigroup and JPMorgan predict the coalition may begin winding down cuts from the middle of the year, before a scheduled end in December, as the market re-balances.

“The commitment to continuing cuts will keep the oil price elevated through the year,” said David Lennox, a commodity analyst at Fat Prophets in Sydney. “OPEC’s compliance to the deal has been excellent. The only cap on a further rally will be the reaction from US producers to higher prices.”

Brent for March settlement was at $68.87 a barrel on the London-based ICE Futures Europe exchange, up 26 cents, at 09:11. The contract closed 1% lower at $68.61 on Friday, falling for a second day. The global benchmark traded at a premium of $5.39 to March West Texas Intermediate.

WTI for February delivery, which expires Monday, was at $63.57 a barrel on the New York Mercantile Exchange, up 20c, after falling 1.5% last week. Total volume traded was at about 8% below the 100-day average. The more-active March contract rose 18c to $63.49.

OPEC and its allies see merit in maintaining their output limits into 2019, Oman Oil Minister Mohammed Al Rumhy told reporters before a meeting to assess compliance to the accord. The compliance rate among all participants in 2018 will beat the 107% average in 2017, Al-Falih said.

Oil-market news:

US drillers last week trimmed the number of rigs targeting crude for a second time this month, according to data from Baker Hughes on Friday. The count dropped by 5 to 747.

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