Crude at Four-Month High as OPEC Signals Commitment to Cuts

(Bloomberg) -- Crude closed higher for a fourth straight day in New York ahead of a weekend meeting where the world’s top exporters will discuss whether to extend supply cuts.

U.S. benchmark oil climbed 0.6 percent on Thursday, settling at a four-month high. Ahead of a meeting in Azerbaijan, the OPEC secretariat urged producers to continue efforts to prevent a surplus this year. Ministers from the coalition’s two central players, Russia and Saudi Arabia, will hold a one-on-one meeting as well as the former nation struggles to keep up its end of a pledge to tighten the market.

The cuts “highlight just how serious the Kingdom is in terms of getting supplies down and tidying this market up to get prices up, which they desperately need,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy.

While U.S. prices advanced, global benchmark crude closed 0.5 percent lower for the day. Word that a meeting to resolve the U.S.-China trade spat was unlikely before April reiterated the fragile economic picture and helped push the dollar higher, undercutting commodities priced in the greenback.

OPEC also issued a “slightly bearish" demand forecast for 2019, while Libya continued to restore production at its main oilfield, said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Massachusetts.

Crude’s nearly 30 percent rise this year has been supported by bullish developments on the supply side, as OPEC and its allies cut production and as American sanctions tighten output from Iran and Venezuela. Yet, U.S. shale production remains at record-high levels, putting a cap on optimism.

“Supply risks are at the front of the mind as Venezuela’s crisis deepens and Iran sanctions exemptions end soon,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich.

WTI for April delivery rose 35 cents to $58.61 a barrel at the close of trading on the New York Mercantile Exchange.

Brent for May settlement slipped 32 cents to $67.23 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $8.32 premium to WTI for the same month.

In OPEC’s monthly report, its Vienna-based secretariat encouraged producers to continue the strategy to reduce output. "While oil demand is expected to grow at a moderate pace in 2019, it is still well below the strong growth expected in the non-OPEC supply forecast for this year,” it said. “This highlights the continued shared responsibility of all participating producing countries to avoid a relapse of the imbalance and continue to support oil-market stability in 2019.”

After the review meeting on March 17 and 18, ministers from the so-called OPEC+ alliance will gather in Vienna next month, and again in June, to decide on output policy for the second half of the year.

--With assistance from James Thornhill, Heesu Lee and Grant Smith.

To contact the reporters on this story: Ben Foldy in New York at bfoldy@bloomberg.net;Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick, Mike Jeffers

©2019 Bloomberg L.P.