Oil rebounds as Russia said to be willing to join OPEC output cuts
NEW YORK (Bloomberg) -- Oil prices bounced back to $51/bbl in New York, erasing an earlier loss, after a report that Russia accepts the need to cut production in conjunction with OPEC.
All eyes are on this weekend’s G-20 summit in Argentina, where Russia’s Vladimir Putin and Saudi Arabia’s Mohammed bin Salman are likely to discuss how to coordinate oil policy. The nations are in talks over the timing of any reduction in supply, Reuters reported Thursday. Producers are due to meet in Vienna next week to discuss a possible cut in 2019.
West Texas Intermediate crude is on track to lose more than 21% this month, which would be its worst since the Great Recession in October 2008. Still, after falling below $50/bbl, a key budgetary marker for U.S. shale drillers, some traders also saw a buying opportunity, said Bart Melek, head commodity strategist at TD Securities in Toronto.
“Sub-$50 crude would stress shale producer finances," he said, “suggesting the upward production trajectory could slow."
West Texas Intermediate for January added as much as 2.6% in New York and was up 74 cents to $51.03/bbl as of 10:24 a.m. local time. Volumes were 49% above the 100-day average.
Brent for January settlement, which expires Friday, advanced 48 cents to $59.24/bbl on London’s ICE Futures Europe exchange. The global benchmark traded at an $8.20 premium to WTI. The more-active February contract rose 50 cents to $59.59/bbl.
Putin praised Saudi Crown Prince Mohammed on Wednesday and said Moscow is ready to cooperate further. He also said crude around $60/bbl is “balanced and fair” and well above the level needed to keep his government’s budget in surplus. By contrast, Saudi Arabia needs oil at more than $80/bbl to balance its budget.
“It’s all about bargaining, and producers aiming for the best deal possible,” said Giovanni Staunovo, a commodities analyst at UBS Group AG. “There are other producers more desperate than Russia for an agreement.”
In the U.S., crude stockpiles rose by 3.58 MMbbl last week in the longest run of gains since November 2015, according to the Energy Information Administration. The increase was greater than the 1-MMbbl gain predicted in a Bloomberg survey, overshadowing a surprise draw in gasoline inventories.
