NEW YORK (DTN) -- New York Mercantile Exchange oil futures climbed Friday morning following a decision by the Organization of Petroleum of Exporting Countries and their non-OPEC producer allies to maintain production cuts through the end of 2018 in an attempt to end global supply overhang.
The decision means the production cuts of 1.8 million bpd that were set to expire in March 2018 will now be extended by nine months, with a review of the policy set for June to take stock of market conditions.
OPEC sources said the June review was a nod to Russia because the Kremlin wants adjustments made if the market gets too tight. Moscow reluctantly backed the decision to extend the cuts after losing the argument that OPEC should wait for supply and demand fundamentals to become clearer in early 2018. Russian oil executives told the Kremlin that they were being hurt by the output cuts.
OPEC Secretary General Mohammad Barkindo early this week said tremendous progress has been made in their efforts to realize their goal of eliminating supply glut. 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.
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 refinery runs surged 1.3% to a 92.6% rate of operable capacity.
The report also showed domestic crude production rose again last week, rising 24,000 bpd to a fresh 46-year high of 9.682 million bpd, and up 983,000 bpd versus same time in 2016.
Later Friday, Houston-based oil services company Baker Hughes will release its weekly rig count report.
At 9:00 AM ET, NYMEX January West Texas Intermediate crude oil futures were 93cts higher at $58.33 bbl. ICE February Brent crude was 94cts higher at $63.57 bbl after the January contract expired on Thursday. NYMEX January ULSD futures climbed 3.16cts to $1.9292 gallon while January RBOB futures surged 1.39cts to $1.7439 gallon.
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