Commodity Blog

Oil prices are climbing higher midweek after reports that the Organization of Petroleum Exporting Countries (OPEC) may extend its production-cut agreement beyond March 2018. This has helped the oil market weigh down pressure from rising US output and crude supplies.

October West Texas Intermediate (WTI) crude futures rose $1.17, or 2.36%, to $50.65 per barrel at 16:40 GMT on Wednesday on the New York Mercantile Exchange. With US crude surpassing the important $50 mark, it is on track for its highest settlement since the end of May.

Brent, the international benchmark for oil prices, is also rallying midweek. November Brent crude futures soared $1.30, or 2.36%, to $56.44 a barrel on London’s ICE Futures exchange. Brent topped $56 for the first time since the middle of April on Wednesday.

Last week, crude oil had its best week since July, buoyed by the Paris-based International Energy Agency (IEA) reporting that the global oil market is starting to normalize as demand is rising and output levels are decreasing.

Oil prices were supported by reports that OPEC may be in the early stages of negotiations to extend its output-cut arrangement beyond the March 2018 expiration date. In November 2016, OPEC and 10 other oil producers agreed to cap output levels at 1.8 million barrels per day (bpd) until March 2018, but its results have been mixed for a wide array of reasons, including cartel members not complying and the shale revolution continuing in the US.

Investors do not believe a final decision will be made until the oil cartel’s next official meeting in Vienna in November. But some analysts are not that optimistic that an extension would impact prices, including Commerzbank strategist Carsten Fritsch.

I cannot see the market tightening unless OPEC cuts output further next year.

The market was immensely disappointed late last year when OPEC opted to lengthen the freeze and refrained to increase the level of cuts.

These reports offset the latest government oil figures. According to the US Energy Information Administration (EIA), domestic crude supplies increased by 4.6 million barrels for the week ending September 15. The EIA further reported that total US domestic crude production jumped by 157,000 bpd to 9.51 million bpd. Gasoline stockpiles tumbled 2.1 million barrels, while distillate stockpiles fell 5.7 million barrels.

If you have any questions and comments on the commodities today, use the form below to reply.