NEW YORK (DTN) -- New York Mercantile Exchange oil futures moved higher Thursday morning on reports the Organization of the Petroleum of Exporting Countries and their non-OPEC partners will announce an extension of their agreement to extend production cuts.
Oil ministers and representatives from OPEC's 14 member countries and 10 nonmember nations are attending OPEC's biannual meeting in Vienna, where they are discussing market conditions and the way forward in alleviating a global oil supply surplus.
OPEC sources told newswires that a consensus has formed to support Saudi Arabia's proposal to extend the output cuts of 1.8 million bpd for nine months through the end of 2018.
The expected supply agreement would come on the one-year anniversary of the original deal, which was implemented on Jan. 1 and initially set to expire in June. In May, the deal was extended to March 2018 because their goal of eliminating global supply overhang had not been met.
Still, OPEC Secretary General Mohammad Barkindo was enthusiastic about their progress thus far, saying early this week that member compliance with the deal has been over 100%.
After reaching record-high levels of more than 380 million bbl over the five-year average, inventories held by 35 countries that are members of the Organization for Economic Cooperation and Development have steadily fallen to stand 140 million bbl above the five-year average in October, Barkindo said.
He added that excess crude oil in floating storage has also been drawn down by 50 million bbl since June. The apparent success of the oil supply cutbacks has prompted investors to boost speculative net length in the oil futures complex, said analysts.
Today's decision is expected to be reviewed at the next OPEC meeting in June 2018. Ahead of the meeting this morning, oil ministers from Iraq, Iran and Angola said a review of the policy in June is necessary if the market becomes too tight.
On Wednesday, the Energy Information Administration said domestic crude oil stocks were drawn down by 3.4 million bbl to 453.1 million bbl in the week-ended Nov. 24, while down 7.0% year-over-year, as crude demand increased.
The EIA report showed bearish products data however, with gasoline and middle distillate stocks rising by 3.6 million bbl and 2.7 million bbl, respectively, as demand for products fell during the week reviewed.
Today is also the last trading day for the month, with the January Brent contract on the Intercontinental Exchange and December RBOB and ULSD contracts on the NYMEX set to expire at the 2:30 PM ET close of regular business.
At 9:00 AM ET, NYMEX January West Texas Intermediate crude oil futures rose 52cts to $57.82 bbl. ICE January Brent crude oil contract rallied $1.05 to $64.16 bbl, near a three-week high of $64.21. The February Brent contract was 72cts higher at $63.25 bbl.
In products trade, December ULSD futures gained 2.25cts to $1.9446 gallon, with the January contract up 2.12cts at $1.9450 gallon. December RBOB futures were 2.27cts higher at $1.7536 gallon, with the January contract rising 2.34cts to $1.7573 gallon.
George Orwel can be reached at email@example.com
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