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Brent oil above $55 close to 2-year high as Saudis backs OPEC cuts

Total CEO says rebalancing oil will take time

Russia, Saudi Arabia to discuss possible extension next week. Prince Mohammed bin Salman says ‘of course' supports roll-over. -Watch video

By Ben Sharples

Petroleumworld 10 27 2017

Brent oil held gains near the highest level in more than two years as Saudi Arabia's Crown Prince Mohammed bin Salman backed the extension of OPEC-led output cuts.

Futures were little changed in London, up 2.8 percent for the week. The prince said Thursday that “of course” he wanted to prolong the curbs beyond the end of March 2018. At the same time, OPEC is negotiating an exit strategy to the deal in an effort to reassure investors the group won't flood the market once the agreement finally expires, people familiar with the talks said this week.

Brent has held gains above $55 a barrel this month as speculation mounts the Organization of Petroleum Exporting Countries will agree at its Nov. 30 meeting to extend cuts by its members and allied nations aimed at draining a global glut. Oil ministers from Saudi Arabia and Russia will meet Nov. 2 to discuss prolonging the deal, Russian Energy Minister Alexander Novak said Tuesday.

“Given how long it's been since oil prices were in this territory, a breach of $60 and a sharp move upward would not surprise,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “The key here will be the response from U.S. producers to higher prices and whether they'll boost output.”

Brent for December settlement was at $59.39 a barrel on the London-based ICE Futures Europe exchange, up 9 cents, as of 1 p.m. in Hong Kong. Prices rose 1.5 percent to $59.30 on Thursday, the highest close since July 2015. The global benchmark traded at a premium of $6.74 to West Texas Intermediate.

See also: Iraq Overtaking Saudi Arabia in Supplying U.S. With Oil

WTI for December delivery lost 2 cents to $52.62 a barrel on the New York Mercantile Exchange. Total volume traded was about 54 percent below the 100-day average. The contract gained 46 cents to close at $52.64 on Thursday, the highest since April. Prices are up 2.2 percent this week.

Prince Mohammed said in an interview with Bloomberg that prolonging the cuts would bring benefits for both OPEC and non-OPEC producers. His comments, which follow Russian President Vladimir Putin's provisional backing to an extension , signal that Riyadh and Moscow are ready to prolong their collaboration to reduce oil supply and lift energy prices.

Oil-market news:

  • Iraq resumed pumping oil from a field in the disputed Kirkuk province, the first sign that output is recovering from last week's fighting between government troops and Kurdish forces.
  • The U.S., long the world's largest oil consumer, is on track to leapfrog Nigeria, Angola, Norway and Venezuela at the end of the year and break into the Top 10 of global exporters .

Story by Ben Sharples; With assistance by Perry Williams from Bloomberg.

bloomberg.com 10 26 2017

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