Oil rises above $50 as Opec backs longer cuts

US futures rose as much as a 1.5%, heading for the biggest weekly gain since March

Oil rose above $50 a barrel in New York for the first time in three weeks on the expectation that Opec will reaffirm efforts to drain a global glut.

US futures rose as much as a 1.5 per cent, heading for the biggest weekly gain since March. Most members support a proposal by Saudi Arabia and Russia to extend supply cuts for nine months, Algerian Energy Minister Noureddine Boutarfa said on Thursday. A Bloomberg survey of analysts last week showed the Organisation of Petroleum Exporting Countries and its allies will probably prolong their agreement at least until the end of the year.

“Opec ministers likely will continue to talk oil higher, there is more chatter on the discussion and that means there will be more volatility in prices,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “We still expect prices to move to $60 over the coming months because the oil market will be in a deficit as supply growth will lag demand growth.”

Opec and its partners will meet on May 25 in Vienna to decide whether to prolong their supply cuts past June. Several members have voiced support for the proposal to extend curbs after Russia and Saudi Arabia said global inventories haven’t yet fallen to targeted levels. Meanwhile, production in the US has been increasing, threatening to derail the group’s goal. West Texas Intermediate for June delivery gained as much as 75 cents to $50.10 a barrel and traded at $50.08 on the New York Mercantile Exchange at 1:51pm in London. Prices were up 4.7 per cent last week, the most since the period through March 31. Volume traded was 29 per cent above the 100-day average.

Output deal

Brent for July colony increased as much as 83 cents, or 1.6 per cent, to $53.27 a barrel on the London-based ICE Futures Europe exchange. The contract added 30 cents to close at $52.51 on Thursday. Prices were up 4.9 per cent last week, heading for a second weekly gain. The global benchmark crude traded at a $2.88 premium to July WTI.

Algeria, which was instrumental in crafting Opec’s historic output deal last year, has reduced production by 55,000 barrels a day, according to Boutarfa, who sees oilfield maintenance in May and June curbing its output by a further 15 per cent. The country is also proposing to set up a high-level committee of experts to advise Opec and non-Opec ministers on extending or curtailing the curbs, he said.