Oil holds gains as producers say market rebalancing

Oil prices came under pressure from a strong dollar, but kept most of their gains from the previous session as major producers meeting in Vienna said the market was well on its way towards rebalancing, Reuters reports.

The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping lift oil prices by about 15 percent in the past three months.

Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday’s meeting of the Joint Ministerial Monitoring Committee, said output curbs were helping cut global crude inventories to their five-year average, OPEC’s stated target.

London Brent crude for November delivery was down 8 cents at $56.78 a barrel by 0614 GMT, near the highest since March. US crude for November delivery was down 15 cents at $50.51, but not far off recent four-month highs.

The dollar index was up 0.2 percent against a basket of currencies. The euro slipped after Germany’s election showed surging support for a far-right party that left Chancellor Angela Merkel scrambling to form a governing coalition.

Russia’s energy minister said no decision on extending output curbs beyond the end of March was expected before January, although other ministers suggested such a decision could be taken before the end of this year.

Iran expects to maintain overall crude and condensate exports at around 2.6 million bpd for the rest of 2017, a senior official in the nation’s state oil company said, while the UAE’s energy minister said its compliance to supply cuts was 100 percent.

Nigeria is pumping below its agreed output cap, its oil minister said.

“Oil is relatively underpriced compared with other markets, but any steep rise would be offset by rising shale oil production,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.

Production curbs have faced rising U.S. shale oil output. US energy firms cut the number of oil rigs operating for a third week as a 14-month drilling recovery stalled.

Markets were also eyeing developments in North Korea. U.S. Treasury Secretary Steve Mnuchin on Sunday said President Donald Trump wants to avoid nuclear war with North Korea and “will do everything we can” to avoid conflict.

The WTI crude front month discount to the same month of Brent futures hit $6.28, the widest since August 2015, as US crude was pressured by hurricane damage to US refineries.