Oil edges up as Saudis discuss extending supply cut
Oil prices edged up on Monday after the Saudi oil minister discussed possibly extending a pact to cut global oil supplies beyond March 2018 with his Venezuelan and Kazakh counterparts.
News of the talks on Sunday helped offset downward pressure on oil prices amid worries that energy demand would be hit hard by Hurricane Irma and its aftermath.
The hurricane knocked out power to nearly 4 million homes and businesses in Florida on Sunday. It is forecast to weaken to a tropical storm over northern Florida or southern Georgia later on Monday.
US crude for October delivery was up 41 cents, or 0.9 per cent, at $47.89 a barrel by 06:48 am, having tumbled 3.3 per cent on Friday.
London Brent crude for November delivery was up 30 cents, or 0.6 per cent, at $54.08, having settled down 1.3 per cent.
“The oil market reacted to the Saudi talks,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. “The drop in US oil refining is also to be offset by higher processing at other nations, so worries over a substantial cut in crude oil demand are fading.”
Hurricane Harvey —which hit two weeks ago —pushed the US refinery use rate to a seven-year low, but largely spared oil and petrochemical plants along the US Gulf Coast from significant damage. Some units are now restarting after shutdowns ahead of or during the earlier storm.
Motiva Enterprises was starting up the large crude unit —a little more than 50 per cent of capacity —at its Port Arthur, Texas, refinery on Sunday, according to a source familiar with plant operations. OPEC and other producers, including Russia, have agreed to reduce crude output by about 1.8 million barrels per day through the end of next March in a bid to reduce global oil inventories and support oil prices.
The Saudi energy ministry said Energy Minister Khalid al-Falih agreed with his Kazakh counterpart that the option to extend the rebalancing effort would be considered in due course.
Elsewhere, Iran will reach an oil production rate of 4.5 million barrels per day (bpd) within five years, a senior Iranian industry official said on Sunday. Iran has been producing around 3.8 million bpd in recent months. Saudi Arabia on Saturday also suspended any dialogue with Qatar, accusing it of “distorting facts”, just after a report of a phone call between the leaders of the two countries suggested a breakthrough in the dispute that also involves the United Arab Emirates, Egypt and Bahrain.