Oil extends rally as US stocks fall more than expected and OPEC nears deal on output cuts

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Flames emerge from a pipeline at Rumaila oilfield in Basra, Iraq, as oil prices extended a rally after US stocks fall sharply. Photo: Reuters

Published: 5:04am, 12 May 2017Updated: 5:04am, 12 May 2017

Oil continued to climb a day after its biggest advance of the year as US stockpiles fell more than forecast and two OPEC members said there’s a consensus to extend their output cuts.

Futures were up as much as 1.9 per cent in New York after surging 3.2 per cent on Wednesday, when government data showed a 5.25-million barrel stockpile drop last week. Two members of the Organisation of Petroleum Exporting Countries said Thursday there is consensus on extending production curbs for six more months when the group meets May 25. Price gains eased after OPEC boosted forecasts for supplies from rivals this year by 64 per cent.

“We’ve probably put a floor in the market,” Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at US Bank, which oversees US$136 billion in assets, said by telephone. “Inventories did fall last week and investors are pricing in expectations of OPEC extending the cuts. Those looking for a bullish narrative have found it.”

A worker checks the valve of an oil pipe at the Lukoil owned Imilorskoye oil field near Kogalym, Russia. Oil prices extended a rally during Thursday’s trading. Photo: Reuters

West Texas Intermediate for June delivery climbed 60 cents, or 1.3 per cent, to US$47.93 a barrel on the New York Mercantile Exchange. Total volume was about 6 per cent above the 100-day average. Futures rose US$1.45 to US$47.33 on Wednesday, the biggest gain since December 1.

Brent for July settlement rose 59 cents, or 1.2 per cent, to US$50.81 on the London-based ICE Futures Europe exchange, after rising 3.1 per cent on Wednesday. The global benchmark oil traded at a US$2.53 premium to July WTI.