NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures rallied Friday, rebounding from Thursday's profit taking led decline. West Texas Intermediate crude and Brent on the Intercontinental Exchange settled at two-month highs on growing risk to Iran's oil exports, while Saudi Arabia said Organization of the Petroleum Exporting Countries and their partners should extend current supply cuts into 2019.
"The Saudis said they'd like to extend [supply] cuts into 2019, which would counter the thriving shale production in the United States," said Andy Lipow, president of Lipow Oil Associates in Houston.
On Thursday, Saudi energy minister Khalid al-Falih said OPEC and their 10 non-OPEC allies including Russia should continue their cooperation, and extend oil supply cuts of 1.8 million bpd beyond December 2018 as currently agreed.
The production cuts have been described as a success so far after sharply drawing down excess inventory. The OPEC/non-OPEC Joint Ministerial Monitoring Committee last month reported that the supply overhang had been cut down by 220 million bbl as of January from an excess of 340 million bbl in January 2017 when the supply agreement took effect.
On the geopolitical front, President Donald Trump on Thursday picked John Bolton as his new national security advisor, raising the prospect of confrontation with Iran, the third biggest oil producer in the Middle East and an arch-rival of Saudi Arabia. Bolton replaces H.R. McMaster, who was considered less of a hardliner.
"John Bolton is very hawkish on Iran, and so the market is pricing in the possibility that President Trump will decertify the Iran nuclear deal, and that would reduce Iran's exports," said Lipow.
Earlier this week, Trump met with Saudi Arabian Crown Prince Mohammed bin Salman, who vehemently opposes the Iran nuclear deal. Trump will need to make his decision on decertifying the nuclear accord by May 12.
Domestically, data for the week-ended March 26 issued midweek by Energy Information Administration showed U.S. commercial crude oil inventories declined 2.6 million bbl, as refineries return from maintenance. EIA shows refinery crude inputs surged 410,000 bpd and runs jumped 1.7% to 91.7% of operable capacity.
In equities trade, the Dow Jones Industrial Average plunged more than 400 points on top of more than 700 points lost on Thursday on fear of a potential trade war, closing at the lowest level since November.
The S&P 500 and Nasdaq 100 indices also lost more than 2% each, falling after China said it plans to raise tariffs on U.S. good in relation against U.S.'s plan to impose tariffs on imports from China. The dollar index weakened to a five-week low.
At settlement, NYMEX May WTI crude oil futures spiked $1.58 to $65.88 bbl, the highest settlement since Jan. 26 and up 5.4% for the week. ICE May Brent crude plunged soared $1.54 to $70.45 bbl, up 6% for the week.
April ULSD futures settled with a 2.61cts gain at $2.0184 gallon, near a seven-week spot high of $2.0251 and up 5.3% for the week. April RBOB futures climbed 2.40cts to $2.0336 gallon, edging off a fresh nearly seven-month spot high of $2.0438, while up 4.3% for the week.
George Orwel can be reached at firstname.lastname@example.org
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