NEW YORK Oil prices rose more than a dollar a barrel on Friday, heading for a second week of gains on growing expectations that leading oil producers will agree at next week’s OPEC-led meeting to extend output cuts aimed at reducing a global crude glut.
Brent crude LCOc1 was up $1.18 at $53.29 at 12:10 p.m., while U.S. benchmark crude oil CLc1 was up $1.13 at $50.48. Both benchmarks were at their highest in about a month, rising more than 2 percent.
The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia meet on May 25 to decide whether to extend output cuts of almost 1.8 million barrels per day. Market watchers expect the group to extend cuts until the end of March 2018.
An OPEC panel is considering even deeper supply cuts to try to boost prices and reduce forward selling.
Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said hedge funds expected the crude glut to recede.
“Time and again they are rebuilding long positions,” he said. “There seems to see this persistent bias to buy on the dips. They’re not getting bearish, they’re coming back in.”
Many investors remain concerned about growing U.S. crude production, which has climbed 10 percent since mid-2016 to 9.3 million barrels per day.
Saudi Arabia, OPEC’s largest producer, is also keeping markets well supplied. Its crude exports rose 275,000 bpd in March from February and its stockpiles increased, official data showed on Thursday.
“I think the cuts are enough to stabilize the market. I think they will likely bring some stock draws but I don’t think it will bring the stock draws that OPEC is hoping for,” said Olivier Jakob, managing director at Petromatrix.
This weekend, U.S. President Donald Trump heads to Saudi Arabia for his first foreign visit. The country’s state oil company Saudi Aramco is set to sign investment deals with several U.S. companies.
Iran holds its first round of presidential elections this weekend. In a note on Friday, Commerzbank wrote that if President Hassan Rouhani remains in office, “the country is likely to continue down its path of moderate opening” which should encourage Western investment and bring “a noticeable rise in Iranian oil production.”
If the winner is Ebrahim Raisi, a critic of Iran’s nuclear deal with the West, the bank said new sanctions “would then very likely be imposed … which could reduce the oil supply from Iran even in the short term.”
(Additional reporting by Stephen Eisenhammer in London, Aaron Sheldrick in Japan, and Henning Gloystein in Singapore; Editing by David Evans and David Gregorio)