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Oil headed for its first back-to-back monthly gain since last year amid signs that efforts by the Organisation of Petroleum Exporting Countries (Opec) and its allies to clear a glut are progressing, and that they’ll stick with the strategy next year.
Futures were little changed in New York and are up 4.8% this month, after rallying 9.4% in September. US crude inventories probably declined for a fifth time in six weeks, according to a Bloomberg survey before government data due on Wednesday.
Saudi Arabian Crown Prince Mohammed bin Salman said last week that he backed prolonging supply curbs, following a similar endorsement by Russian President Vladimir Putin earlier this month.
Global benchmark Brent crude this month topped $60 a barrel for the first time since 2015 on hopes the Organisation of Petroleum Exporting Countries and partners including Russia will prolong their curbs aimed at eliminating a glut.
Prices were also boosted by fighting between Iraqi government troops and Kurdish forces in the oil-rich Kirkuk region. Still, the potential for continued supplies from US shale fields is a concern.
"The oil market is tightening and the supply surplus is shrinking, said Norbert Ruecker, head of commodity research at Julius Baer Group in Zurich.
"Sentiment is very bullish since the market seems to expect that the supply surplus will erode further heading into 2018."
West Texas Intermediate oil for December delivery was at $54.14 a barrel on the New York Mercantile Exchange at 10:17am in London, 1 cent lower. Prices are up about 14% over September and October.
Total volume traded was about 52% below the 100-day average. The contract on Monday settled at $54.15, the highest close since February 23.
Brent for December settlement, which expires on Tuesday, fell 11 cents to $60.79 a barrel on the London-based ICE Futures Europe exchange.
The contract on Monday advanced 46 cents to $60.90, the highest close since July 2015. Prices have risen 5.7% this month.
The global benchmark crude traded at a premium of $6.71 to WTI.
In the Middle East, crude exports resumed from Iraq’s Kurdish region after halting earlier on Monday, a port agent said, highlighting uncertainty about pipeline shipments from Opec’s second-biggest producer.
Oil-market news:
Government data on Wednesday is expected to show US inventories fell 2.1 million barrels last week, down for a fifth time in six weeks.
Saudi Arabia will need oil to trade at $70 a barrel to cover government spending next year, down from $96.60 in 2016, according to the International Monetary Fund.
BP signalled growing confidence the oil-industry downturn is coming to an end by starting to buy back shares issued to help cover its dividend during the price slump. While the Basra province in southern Iraq can produce 4.5 million barrels a day of crude, the nation is committed to Opec output cuts, said Ali Shadad al Fares, head of the energy committee of the Basra council.
JPMorgan Chase has raised price forecasts for next year, citing continuing inventory draws and tighter market conditions.
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