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Oil is sustaining its rise above $61 a barrel Tuesday as expectations of an extension to Opec-led production cuts beyond March buoyed prices and bringing succor to cash strapped producers like Nigeria.
“The latest uptick can to a certain extent be attributed to further Saudi and Russian support for extending the supply cut,” noted analysts at JBC Energy.
Saudi Arabia’s crown prince Mohammed bin Salman said on Saturday the kingdom “affirms its readiness” to back an extension of supply curbs by global producers into 2018.
His comments followed remarks in recent weeks by Opec and Russian officials calling on some of the world’s biggest producers, inside and outside the cartel, to prolong the cuts and active management of the oil market until the end of 2018.
Global producers seek an end to a three-year oil downturn that has crushed the economies of resource-rich nations and hammered the budgets of oil and gas companies which have cut back on investments into future production.
But prices had already found support late last week, with Brent crude oil rising to its highest price in more than two yearson Friday as the market reflected signs of a shrinking crude surplus.
Hedge funds and other money managers have amassed a near record net long position in crude futures and options, indicating that they see oil prices shifting to a slightly higher price range.
“We think the move reflects the start of a widespread re-evaluation by traders of global balances and the pace of inventory draws,” said Paul Horsnell at Standard Chartered. Stephen Brennock, at London-based broker PVM, said not only have supply curbs by some of the world’s biggest oil producers — which came into effect in January — helped give oil a boost, but so have “geopolitically-fuelled” disruptions in the Middle East and a lull in US drilling activity.
