Oil futures started December climbing on Friday, after a group of major oil producers agreed on Thursday in Vienna to continue production caps through 2018.
A fall in the value of the US dollar also helped oil’s gains.
But the agreement renewed concerns about impact on prices from growing output from producers who aren’t part of the deal, particularly the US – that saw West Texas Intermediate prices down for the week.
January West Texas Intermediate crude futures climbed 96 cents, or 1.7%, to settle at $US58.36 a barrel in New York, down a round 1% for the week.
FactSet data showed that 1% fall was the largest in two months – since the first week of October.
In Europe, February Brent crude futures rose $US1.10, or 1.8%, to $US63.73 a barrel, with the new front-month contract up 0.4% for the week.
The agreement between OPEC and several non-OPEC countries, including Russia, to cut production by roughly 1.8 million barrels a day from October 2016 levels was implemented in January, in a effort to rebalance market supply and demand. The cuts were previously set to end in March of 2018.
Russian Oil Minister Alexander Novak made it clear that his country, not an OPEC member, fully agreed to extend the cuts through 2018 and would not look to abandon them if prices rise, as some suggest it will.
“Adherence to the 2017 quota levels beyond [the first quarter of 2018] for OPEC and Russia will create a fundamentally tighter balance by around [400,000 barrels a day] (all else equal) and therefore presents upside risk to our price forecast for [the second half of 2018],” wrote Michael Cohen and Warren Russell, of the Barclays commodities research team, in a note released on Friday.
“With global oil stockpiles still sitting well above historical averages, an extension was widely expected and OPEC and friends delivered a new expiration date of December 2018,” Tyler Richey, co-editor of the Sevens Report said in his latest newsletter. “The caveat of a ‘policy review’ in June was the reason that prices did not rally on the news.”
And the continued rise in US production, which is at “all-time highs and charging toward 10 [million barrels a day], is still the number one headwind on the oil market as it weighs on sentiment and worsens the fundamental argument for the bulls,” he added
Baker Hughes on Friday reported second weekly rise in the number of active US oil rigs – up 2 at 749 rigs.
“Unless [oil] demand unexpectedly picks up in the coming months, it will be very difficult for WTI futures to rally meaningfully past $60,” said Richey in a report on Marketwatch.com.
