NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled higher Thursday afternoon on the prospect of the Organization of the Petroleum Exporting Countries and 10 non-OPEC producers led by Russia prolonging their agreement to cut production through the end of 2018, as well as on U.S. supply concerns.
"The Saudi King [Salman Abdubaziz] met with President Putin of Russia and they agreed to collaborate and to continue implementing production cuts through next year, and the other thing is Tropical Storm Nate is heading to the Gulf Coast and could disrupt production off the coast of Louisiana and Mississippi," said Houston-based Andy Lipow of Lipow Oil Associates.
Saudi Arabia and Russia, the world's two top producing nations, helped secure the agreement last fall that restrained output by OPEC members and 10 nonmembers. The agreement that became effective in January was initially for six months, with the pact cutting 1.8 million bpd in oil production extended in May to March 2018. The objective of the agreement is to reduce global surplus, drawing down inventory held by the 35 countries that make up the Organization for Economic Cooperation and Development to their five-year average.
However, since they have not achieved that goal, talks are underway to extend the duration of the cuts beyond March 2018.
This week, the Saudi King made a state visit to Russia, where President Vladimir Putin said he's open to extending the agreement to December 2018, although they delayed a decision until the current deal nears its end in March 2018.
Saudi Oil Minister Khalid al-Falih welcomed Russia's flexibility on the issue of extending the cuts and said the Saudi government will also be flexible so that a consensus benefiting the market can be reached.
Those talks coincided with data from Energy Information Administration showing crude stocks plunged 6.0 million bbl to a 20-month low of 465.0 million bbl during the last week of September while U.S. exports soared to a record high near 2.0 million bpd.
In the Atlantic, Tropical Storm Nate moved across Nicaragua on its way to Honduras, with forecast models showing its taking aim at the U.S. Gulf Coast this weekend, according to the National Hurricane Center. The Gulf Coast has just recovered from Hurricane Harvey that hit Texas on Aug. 25, shut down nearly a quarter of U.S. refining capacity.
NYMEX November West Texas Intermediate crude contract rallied 81cts to a $50.79 bbl settlement, ending above support at $50.31. December Brent crude oil futures on the Intercontinental Exchange gained $1.20 to $57 bbl, trading at a $6.21 bbl premium to WTI, up 39cts from the prior day's close.
November ULSD futures climbed 1.24cts to settle at $1.7863 gallon, off a $1.8127 four-day high. November RBOB futures surged 3.09cts to $1.6114 gallon, off a four-day high of $1.6330.
George Orwel can be reached at email@example.com
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