- OPEC to meet this month to discuss production cut pact
- Strong demand also supports crude prices
- Middle East producers raise prices to Asian buyers
Oil prices rose on Friday, nearing their highest levels in more than two years, with buyers attracted by expectations of an extension to a global pact to cut output that has reduced oversupply.
Global benchmark Brent futures traded up 41 cents at $61.03 a barrel, approaching levels around $61.70 a barrel last seen in July 2015. Brent has risen around 38 percent since its low in 2017 reached in June.
U.S. West Texas Intermediate (WTI) crude traded at $54.78 a barrel, up 24 cents. WTI is around 30 percent above its 2017 low hit June.
“Wednesday’s EIA report was bullish so the longs took profit then but now the uptrend is reasserting itself. Roll-over of the OPEC/non-OPEC deal looks certain and is also supportive,” said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.
The Organization of the Petroleum Exporting Countries meets at the end of November to discuss further action after it agreed nearly a year ago with Russia and other producers to hold back 1.8 million barrels per day (bpd) of oil supply.
Russia said on Thursday the deal, which is due to expire in March, could be extended if necessary but that a decision was not imminent.
While supplies are being withheld, demand is also rising, especially in China, whose roughly 9 million bpd of imports have surpassed those of the United States to top the world’s crude importer list.
“China’s oil demand growth appears to be accelerating,” investment bank Jefferies said.
Physical oil prices are also rising. Saudi Aramco, the UAE’s ADNOC and Qatar Petroleum have all raised their crude prices for Asian buyers, with Aramco’s December premium over the average of the Oman and Dubai benchmarks now at the highest in three years.
Traders also eyed risks from ongoing financial troubles of OPEC-members Venezuela and its state oil company PDVSA.
The government and PDVSA owe some $1.6 billion in debt service and delayed interest payments by the end of the year, plus another $9 billion in bond servicing in 2018.
The next hard payment deadline for PDVSA is an $81 million bond payment that was due on Oct. 12 but on which the company delayed payment under a 30-day grace period. Failing to pay that on time would trigger a default, investors say.