Oil prices rise after Saudi Arabia says it wants output cuts extended

Oil prices fell early in the day on expectations of US crude stocks increase

Oil prices rebounded after falling in trading earlier on Tuesday after Saudi Arabia said it would favor extending the OPEC supply cut deal for another six months.

Oil futures have been supported by OPEC production cuts, but also capped by rising US shale oil production.

A report by the Wall Street Journal on Tuesday said Saudi Arabia told OPEC officials it would like to extend production cuts that began in January to the end of the year.  Initially, the cuts were to last only six months.  OPEC members had previously said they were in favor of extending the agreement, as long as non-members, including Russia, participated.

On Tuesday, Russian Energy Minister Alexander Novak said his country will soon begin consultations with its oil producers about the possibility of extending the OPEC supply cut deal, according to Russian news agency TASS.

Novak said Russia’s final decision will depend on the oil market in April and on forecasts for May and June.

 

West Texas WTI settled up by 32 cents to $53.40/barrel, surpassing a five-week high.

Brent crude was increased by 25 cents to close at $56.23/barrel, its highest since March 7 at $56.16.

Prices had fallen earlier in the day on expectations that the US crude inventory would rise again.  According to Reuters, analysts are also concerned that growth could falter and that the crude oversupply has not yet cleared.  Another concern impacting oil prices is rising tensions over North Korea and Syria.

“There’s a lot of heightened geopolitical tension on two fronts,” Phil Streible, senior market strategist at RJO Futures told Reuters.

On Tuesday, as a US Navy strike group travelled towards the western Pacific, North Korean state media warned the United States that any sign of American aggression would result in a nuclear attack on the US.

In a tweet, President Trump said North Korea was “looking for trouble” and that the US would “solve the problem” with or without China’s help.

Oliver Jakob, managing director of Petromatrix told Reuters “Geopolitical tensions are bad for global demand growth.”

Jakob also said the increasing discount of the current Brent crude price to the contract in the next month is “basically telling you the market is not actually that tight”.

Analysts also anticipate US crude inventories, which have reached record highs in recent weeks, are expected to rise for the fourth straight week.

Inventory supply data from the American Petroleum Institute will be released on Tuesday and the US Energy Information Administration will release its supply report on Wednesday.