Brent climbed above US$64 as investors closely watch for signals from Opec on the future of its production curbs.
Futures rose 1.6 per cent in London after falling 1.1 per cent in the previous two sessions. Saudi Arabia’s energy minister Khalid Al Falih said Opec and its allies will not discuss a strategy to exit the deal before the middle of next year and Iraq’s Minister Jabbar Al Luaibi said the group will monitor output every three months.
Opec has worked hard to tell traders its job in cutting global inventories is not done yet and a extension of the production deal is essential to continue that work. Ministers gathered in Vienna are ready to extend the curbs to the end of 2018 to ensure global stockpiles keep falling toward the five-year average yet doubts persist on the strength of the group’s continued commitment. Traders will scour the communique following the meeting for signals.
“With the recent comments suggesting a nine-month extension, anything shorter could disappoint market expectations. Hence, we think a nine-month deal extension,” said Giovanni Staunovo, a commodity analyst at UBS. “If they review it mid-year, that would be only be a three-month extension.”
Brent for January settlement, which expires Thursday, climbed $1 to $64.11 a barrel as of 10:40am in London on the ICE Futures Europe exchange. The global benchmark traded at a premium of $6.15 to West Texas Intermediate. The more-active February contract rose 65 cents to $63.18.
WTI for January delivery was at $57.93 a barrel on the New York Mercantile Exchange, up 63 cents. Total volume traded was about 27 per cent below the 100-day average. Prices lost 69 cents to close at $57.30 on Wednesday.
Mr Al Falih prefers a nine-month extension of the deal beyond March. “If something is working, you don’t let go,” and inventories haven’t yet reached “comfortable” levels, he said in Vienna before start of Opec’s ministerial meeting.
For Russia, the biggest and most influential of the cartel’s allies, reassurance about how the curbs would eventually be wound down seemed to be as important as the duration of the extension, according to people involved in closed-door negotiations prior to the ministerial meeting. Mr Al Falih said an exit strategy won’t be discussed before the third quarter of next year.