Oil lingered near $46 a barrel as Saudi Arabia and Russia sought to appease growing skepticism that a global supply glut is going away soon.
Futures swung between gains and losses in New York on Monday after a rout last week erased the rally following OPEC’s deal to cut production in November. Saudi Arabia’s energy minister Khalid Al-Falih said that, while the rebound in U.S. production has slowed OPEC’s efforts, the group will likely maintain cuts this year and possibly into 2018. Russia is ready to support extending the oil deal beyond 2017, the nation’s Energy Ministry said.
“The weak immediate fundamental picture continues to drive prices lower,” Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone. Even with Saudi Arabia and Russia discussing a deal extension, it’s clear the market is saying it still has yet to see any meaningful effect of the cuts on inventories, he said.
Oil is down almost 15 percent for the year after OPEC-driven optimism fizzled out as shale drillers keep adding rigs and U.S. production has been rising every week since mid-February. The Organization of Petroleum Exporting Countries will meet May 25 to decide whether to extend supply cuts through the second half of the year.
West Texas Intermediate for June was trading at $46.35 a barrel, up 13 cents, at about 1:10 p.m. Central time.
Brent for July settlement declined 47 cents to $48.63 a barrel on the London-based ICE Futures Europe exchange after earlier climbing as much as 1.7 percent. The global benchmark crude traded at a premium of $2.39 to July WTI.
Ministers from some OPEC countries have discussed the possibility of deepening their output cuts, yet no consensus has been reached, according to delegates who asked not to be identified.
Producers are studying different scenarios for extending the cuts, and Kuwait supports all efforts to stabilize oil markets, Kuwait’s Oil Minister Issam Almarzooq said. The global oil market will soon rebalance and return to a “healthy state,” Al-Falih said at the Asia Oil and Gas Conference on Monday.
Saudi Arabia and Russia’s comments are “very minor bullish pressure. If they come up with some kind of formal agreement and other countries sign off on it, that would be more meaningful,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. “But right now, it’s something that hasn’t been done and it’s still off into the future.”
Money managers cut bets on rising WTI prices by 20 percent in the week ended May 2 to the lowest level since November, according to U.S. Commodity Futures Trading Commission data on Friday. Net-long positions in Brent oil also declined.