OPEC, non-cartel nations may extend oil cut another 6 months

"That (Libya), along with the Iranian oil minister saying there is likely to be an extension to the production cut deal, helped crude oil rally overnight", Greg McKenna, chief market strategist at futures brokerage AxiTrader, said.

"We need to see conformity across the board", to 100 percent, he told the opening session of the one-day meeting, which includes Russia, Venezuela, Oman, Algeria and Iraq.

"When you look at the last two-and-a-half weeks we've moved into a sliding pattern vs. the sideways trend we have seen for much of the year", said Michael Train, director of global energy strategy at RBC Capital Markets. So far, five Opec members, including Kuwait and Angola, have backed an extension of the cuts.

Opec countries and 11 other oil-producing nations, including Russian Federation, agreed in December 2016 to slash production, the first time in 15 years that a global pact had been struck. Eleven other non-OPEC oil-producing countries pledged in December to cut an additional 558,000 barrels a day, reaching an overall reduction of 1.8 million barrels per day.

After Sunday's meeting, Kuwait's Almarzooq, the compliance committee's chairman, said OPEC is assessing whether to prolong the cuts for another six months.

Brent rebounded from testing a support of $50 a barrel on Monday and was underpinned by a weak dollar, which can attract investors to safer commodity markets while making oil cheaper for countries using other currencies.

More news: Oil stable on falling Libyan output, but bloated U.S. market still weighs

The IEA was slightly more bullish in its forecast this month as it projects the market to attain a deficit in H1 unlike Opec which expects that to happen in the second half of this year.

A Reuters survey indicates output from all 13 OPEC members fell 230,000 bpd in March from February's revised level and indicated members subject to the deal achieved 95 percent compliance.

If industry data due Tuesday and government data on Wednesday show USA stockpiles are continuing to rise, it would be further evidence that the effect of output curbs by other producers is being blunted by rising American supply and drilling activity.

Despite the slump in oil prices, the Russian ruble has been one of the strongest global currencies over the last 14 months, gaining over 30 percent against the U.S. dollar.

"Certain factors, such as low seasonal demand, refinery maintenance, and rising non-OPEC supply, have slowed down the positive impact of the production adjustments on inventory drawdowns", the committee said in its statement.

A record amount of United States crude oil has found its way to Asia and other destinations this year and more is expected to be shipped out as traders take advantage of arbitrage opportunities by sending excess USA oil into regions where it can find buyers. Others had anticipated that the soonest the cartel might make such a decision would be at its 172 meeting in Vienna on May 25. "We hope to resume within a couple of months".

  • Rita Burton