Putin pact with OPEC edges oil over $59 mark
Barrel price nears two-year high as Russia drives market with renewal of production cut, writes Robert Tuttle
Oil briefly surpassed $59 a barrel in New York for the first time in two years as OPEC and Russia were said to have crafted the outline of a deal to extend their oil production cuts.
Futures closed 1.6pc higher Friday, just 10 cents below a fresh two-year high. After days of talks, Moscow and Riyadh now agree on the need to announce an additional period of cuts at the November 30 meeting, although both sides are still hammering out crucial details, according to people involved in the conversations.
Moscow had been hesitating over the need for an extension because the current deal doesn't expire until the end of March.
"Russia has been scared of higher prices and has been sort of unwilling to commit to a nine- month" extension of cuts, said Sam Alderson, analyst at Energy Aspects.
Oil market strength comes from "the more positive signs from Russia", Alderson added.
The US benchmark last week traded at levels last reached in mid-2015 on heightened optimism that the Organisation of Petroleum Exporting Countries (OPEC) and its allies will agree to prolong cuts until the end of next year.
As of Friday prices were up more than 8pc in November, heading for a third monthly gain in what would be the longest winning streak since May last year.
"Everyone is in favour of extending the deal to reach its final goals. Russia also supports these proposals," Energy Minister Alexander Novak told RBC TV.
West Texas Intermediate (WTI) for January delivery rose by 93 cents to $58.95 a barrel on the New York Mercantile Exchange, after touching $59.05. There was no settlement Thursday because of the Thanksgiving holiday in the US and all transactions were booked on Friday.
Brent for January settlement climbed 31 cents to $63.86 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $4.91 to WTI.
The oil market is being driven by Russia, Phil Flynn, senior market analyst at Price Futures Group, said in a phone interview. The oil producer has been sending mixed signals.
"At the end of the day, Vladimir Putin kind of favoured" an extension, Flynn said. "It's definitely supportive of the market."
Prices have also been supported by the shutdown of the Keystone pipeline that supplies as much as 590,000 barrels a day of Canadian crude to the US. The shutdown entered its second week on Friday after a November 16 leak spilled 5,000 barrels in South Dakota. The line carries Canadian crude to Cushing, Oklahoma, the main pipeline and storage-tank hub in the US.
US crude inventories declined to about 457.1m in the week ended November 17, according to the Energy Information Administration.
Stockpiles at Cushing, Oklahoma, dropped by 1.83m barrels to 61.2m, the largest draw since July.
Meanwhile, American production gained for a fifth week to 9.66m barrels a day.