NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled higher Monday afternoon after Saudi Arabia's energy minister Khalid al-Falih said the Organization of the Petroleum Exporting Countries and their 11 non-OPEC allies may extend their oil output cuts through 2018, which is more than the six-month extension the market has until now been expecting.
The current six-month agreement to cut production of nearly 1.8 million bpd was announced in late 2017 and implemented Jan. 1 is set to expire on June 30. OPEC has a biannual meeting scheduled on May 25 in Vienna when it will discuss about market conditions, with the cartel expected to approve an extension of the production cuts.
Al-Falih said today that OPEC would do whatever it takes to rebalance the market and that he expects the current supply deal to be extended to the end of 2017 or possibly longer. Iran and non-OPEC Russia have indicated they would support the extension.
The OPEC-led oil production cuts have not substantially reduced a global supply surplus because of the constant increase in U.S. oil output although analysts said extending the production cuts to next year would clear the global surplus.
For every barrel OPEC takes out of the market, U.S. oil shale producers have been adding 0.8 points of a barrel, said Houston-based analyst Kyle Cooper at IAF Advisors.
In the latest report, Houston-based oil services company Baker Hughes, Inc. reported the number of rigs drilling for oil in the U.S. rose by six to 703 during the week-ended May 5, rising for the 16th straight week to a better than two-year.
U.S. oil production at 9.293 million bpd during the week-ended April 28 was up 15.7 million bbl higher than a year earlier and 117.7 million bbl above their five-year average, according to the Energy Information Administration.
For the week-ended May 5, an early survey shows U.S. crude stocks are expected to have fallen by 2.1 million bbl, with gasoline stocks seen down 1.125 million bbl and distillate supplies 800,000 bbl lower.
The NYMEX June WTI futures contract settled 21cts higher at $46.43 bbl while IntercontinentalExchange July Brent crude oil futures ended up 24cts at $49.34 bbl. The Brent premium over WTI was little changed at $2.91.
The NYMEX June ULSD futures contract rallied 1.90cts to $1.4556 gallon while the June RBOB futures contract advanced by 1.32cts to $1.5178 gallon at settlement.
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