OPEC signals cuts extension, oil traders ponder response

OPEC signals cuts extension, oil traders ponder response

OPEC signals cuts extension, oil traders ponder response

The rise came after steep falls last week on the back of ongoing high supplies from countries that aren't participating in the cuts, including the US where output is soaring.

The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is the de-facto leader, and other producers including Russian Federation pledged to cut output by 1.8 million barrels per day (bpd) in the first half of the year to boost the market.

Brent, the worldwide crude benchmark, gained 0.5% to $49.59 per barrel while West Texas Intermediate, the U.S. benchmark, rose 0.6% to $46.68 per barrel at the time of writing.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for July delivery ticked up 72 cents to settle at $49.10 a barrel by close of trade.

"Given recent increases in USA production, markets are likely to take comfort from an agreement that lasts long enough to allow the market to move towards balance and reduce inventory", said Ric Spooner, a chief market analyst at CMC Markets.

Khalid-al Falih, the Saudi energy minister said on the sidelines of a conference on Monday that he expected the Opec-led group of producers to extend the production curbs now in place until at least the end of the year, the Financial Times reported.

Russia's energy chief supports extending last November's deal by the world's largest oil producers to rein in their combined output.

He said a deal on cutting output could extend early into next year. "OPEC members have no choice but to talk up prices by signalling an extension to the production cuts agreement".

Oil prices fell on Tuesday, surrendering earlier gains, rattled by concern over slowing demand and the rise in US crude output that has shaken investors' faith in the ability of OPEC to rebalance the market. However, with hedge funds turning bearish and oil prices giving up most of their post-agreement gains last week, the need for a clearer signal has become urgent.

Opec producers are set to meet later this month but say that decreasing supply to increase prices could actually backfire.

OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

The ongoing production curb deal may be extended to the last half of the year and possibly to the next year.

For the week to May 2, investors cut bullish bets on Brent to the lowest level since late November, while hedge funds and money mangers also cut gross long positions in USA crude futures to the lowest since early November.

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