Oil advances on signs of increased OPEC compliance with accord
NEW YORK (Bloomberg) -- Crude climbed as Iraq said it’s close to implementing its share of pledged output curbs as part of OPEC’s effort to trim bloated global inventories.
Futures rose as much as 1.1% in New York. Iraq has trimmed supply by 180,000 bpd and will cut a further 30,000 bpd by the end of the month, Oil Minister Jabbar Al-Luaibi said. President Donald Trump intends to sign two executive actions Tuesday that would advance construction of the Keystone XL and Dakota Access pipelines, according to a person familiar with the matter.
Oil has held above $50/bbl since the Organization of Petroleum Exporting Countries and 11 other countries agreed late last year to curtail supply by about 1.8 MMbpd. While Saudi Arabia says more than 80% of the targeted cut has been implemented since the deal took effect Jan. 1, Goldman Sachs Group Inc. warned Tuesday that prices above $60 will boost output, including from shale. U.S. drillers last week added the most oil rigs since 2013.
"Compliance is a big deal," Thomas Finlon, director of Energy Analytics Group in Wellington, Florida, said by phone. "The initial signs are good. The Saudis said that OPEC has already cut production by 1.5 MMbbl out of the 1.8 million promised."
West Texas Intermediate for March delivery rose 43 cents, or 0.8%, to $53.18/bbl at 10:37 a.m. on the New York Mercantile Exchange. Total volume traded was about 18% below the 100-day average.
Brent for March settlement climbed 36 cents, or 0.7%, to $55.59/bbl on the London-based ICE Futures Europe exchange, trading at a $2.39 premium to WTI.
Pipeline construction
TransCanada Corp.’s Keystone pipeline was rejected under former President Barack Obama, and Energy Transfer Partners LP’s $3.8 billion Dakota Access project was stalled when the Obama administration halted work on land near Lake Oahe in North Dakota amid protests by Native American groups.
"It’s the oil industry’s turn to be in Trump’s barrel," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. "This isn’t a surprise because these pipelines fit into his pro-industry, pro-infrastructure agenda."
In Iraq, OPEC’s second-biggest producer, 90% of output cuts have come from oil companies run by the federal government. But Baghdad is also coordinating reductions with the semi-autonomous region of Kurdistan and international oil companies, Al-Luaibi said in London. It’s too early to say if the cuts could be extended beyond the initially agreed six-month term, he said.
Libya, which was exempt from the OPEC production curbs, is currently pumping 715,000 bpd, the highest level in three years, National Oil Corp. Chairman Mustafa Sanalla said in the text of a speech given in London. He sees output at 1.25 MMbpd by year-end 2017.