Oil prices rebounded from five-month lows on Friday following assurances by Saudi Arabia that Russia is ready to join the Organization of the Petroleum Exporting Countries (OPEC) in extending supply cuts to reduce a persistent glut.
Traders also noted the technically oversold condition of the oil complex, which collapsed almost 20 percent from recent highs in mid-April, helped restrict further selling.
Brent futures were up $1.20, or 2.5 percent, at $49.58 a barrel by 11:02 a.m. EDT (1502 GMT), while US West Texas Intermediate (WTI) crude was up $1.09, or 2.4 percent, at $46.61 per barrel.
After falling almost 5 percent on Thursday, both contracts continued to collapse overnight with WTI falling to $43.76, its lowest since Nov. 15 and Brent down to $46.64, its lowest since Nov. 30 when OPEC agreed to cut production during the first half of 2017.
Both benchmarks started to trim earlier losses after Saudi Arabia’s OPEC Gov. Adeeb Al-Aama told Reuters that OPEC and non-OPEC nations were close to agreeing on a deal on supply cuts.
“Based on today’s data, there is a growing conviction that a six-month extension may be needed to rebalance the market, but the length of the extension is not firm yet,” the Saudi official said.
OPEC sources said on Thursday that OPEC is likely to extend cuts when it meets on May 25 but that a deeper cut is unlikely. OPEC and non-OPEC states initially agreed to cut 1.8 million barrels per day (bpd) in the first six months of 2017.
Despite the gains so far on Friday, both benchmarks were on track to fall for a third week in a row, their longest losing streak since November.
Brent and WTI futures are down about 17 percent so far this year despite OPEC efforts to support prices. The benchmarks are trading around levels last seen before the joint deal to cut output was first announced.
“The energy complex is slowly succumbing to an opinion that this year’s OPEC production cuts have been ineffective,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
Brent traded volumes on Thursday reached a record high of nearly 542,000 contracts, suggesting that hedge funds had accelerated reductions to their long positions.
Pierre Andurand, who runs one of the biggest hedge funds specializing in oil, liquidated his fund’s last long positions in oil last week and is running a very reduced risk at the moment, a market source familiar with the development said.
Adding to concerns about bulging inventories, traders pointed to soaring US oil output, which is up more than 10 percent since mid-2016 to 9.3 million bpd, almost matching the output of top producers Russia and Saudi Arabia.

Source: Arab News