Oil prices post weekly gains on rising belief OPEC will extend production cuts

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Saudi Arabia's Energy Minister Khalid al-Falih and Russia's Energy Minister Alexander Novak shake hands after a joint briefing in Beijing, China, as an OPEC meeting next week is expected to extend production cuts into 2018. Photo: Reuters

Published: 6:50am, 20 May 2017Updated: 6:50am, 20 May 2017

Oil prices rose on Friday, closing out a second week of gains on growing expectations that OPEC and other producing countries will agree next week to extend output cuts.

Brent crude settled up US$1.10, or 2.1 per cent, at US$53.61, the highest settlement for the international benchmark since April 18. US benchmark crude oil rose 98 cents to US$50.33, the highest close since April 19. US crude gained 5.2 per cent for the week, while Brent rose 5.4 per cent.

The Organisation of the Petroleum Exporting Countries (OPEC) and other producers including Russia are scheduled to meet on May 25. They are expected to extend output cuts of 1.8 million barrels a day until the end of March 2018.

The OPEC-led group is trying to reduce a global crude glut that has been slow to balance out due to weak demand and rising production elsewhere, particularly the United States. An OPEC panel is considering even deeper supply cuts to try to boost prices.

A worker checks the valve of an oil pipe at the Lukoil owned Imilorskoye oil field near Kogalym, Russia. OPEC and other major producers like Russia are expected to extend production cuts into 2018. Photo: Reuters

Many investors remain concerned about high global inventories, and supply data from around the world shows that drawdowns of global inventories have slowed or even reversed.

US crude production has climbed 10 per cent since mid-2016 to 9.3 million barrels per day as shale producers have taken advantage of higher prices to boost activity. Energy services firm Baker Hughes said US drillers added oil rigs for an 18th week in a row, the second-longest streak on record.