Oil rises on Saudi Arabia announcement

OPEC leader said pact members should continue cooperating beyond 2018

Oil prices climbed on Monday, pushed higher by comments from Saudi Arabia that cooperation between oil producers who are currently withholding supplies would continue beyond 2018.

Strong global economic growth and a drop in US drilling activity also supported crude, traders said.

Saudi Arabia, the world’s top oil exporter and leader of the Organization of the Petroleum Exporting Countries (OPEC), said on Sunday that major oil producers were in agreement they should continue cooperating on production after their deal on supply cuts expires this year.

“There is a readiness to continue cooperation beyond 2018... The mechanism hasn’t been determined yet, but there is a consensus to continue,” said Saudi Arabia’s Energy Minister Khalid al-Falih in Oman.

A group of oil producers including OPEC and Russia, the world’s biggest crude producer, started to withhold production in January 2017 to prop up prices. The deal is set to expire at the end of 2018.

In the US, declining drilling activity for new oil production further supported crude.

US drillers cut five oil rigs in the past week, bringing the count down to 747, energy services firm Baker Hughes said on Friday.

Despite this, the rig count in 2017 and earlier this year remains much higher than in 2016, resulting in a 16 percent rise in US production since mid-2016 to 9.75 million barrels per day.

Beyond supplies, strong global economic growth is also supporting oil prices.

“During the last four quarters, the underlying global growth dynamic began to shift... Global growth has become synchronized and accelerated above trend,” US bank Morgan Stanley said over the weekend in a note.

In the latest indicator, Japanese manufacturing sentiment in January jumped to an 11-year high, a Reuters Tankan poll showed on Monday, highlighting the optimism driven by nearly two years of economic expansion.

Despite the well-supported market, analysts warned oil markets had lost some steam since their peak early last week.