Crude oil futures were higher during mid-morning trade in Asia Tuesday, extending the uptrend seen Monday, as expectations increased that the OPEC+ producer group would extend global output cuts. At 10:35 am Singapore time (0235 GMT), June ICE Brent crude futures were up 29 cents/b (0.42%) from Monday’s settle at $69.30/b, while the NYMEX May light sweet crude contract was 30 cents/b (0.49%) higher at $61.89/b.
“Crude oil futures scaled the charts as market sentiments remain bullish on supply-side tightness for the coming term,” Phillips Futures investment analyst Benjamin Lu said.
“OPEC oil supply has reportedly hit a four-year low in lieu of geopolitical factors and [due to] sharp output cuts by members in the current term. The oil market rally looks poised to extend its bull run as the general market consensus remains broadly positive on supply concerns in Q2,” Lu added. Iranian oil minister Bijan Zanganeh said Monday he believes OPEC will have “no difficulty” extending its agreement with Russia and other non-OPEC partners in managing the oil market.
“We have a common understanding of the market situation,” Zanganeh said in Moscow after meeting with Russian counterpart Alexander Novak. “I cannot speak on behalf of OPEC, but as I understand, there is no difficulty to extend the cooperation.”
Russia and nine other non-OPEC allies are in the third year of collective production cuts with OPEC to support oil prices, having extended multiple times what was initially presented as a six-month deal that was to expire in June 2017 Meanwhile, analysts surveyed Monday by S&P Global Platts were looking for US commercial crude inventories to have fallen by around 100,000 barrels to 442.2 million barrels in the week ended March 29. The draw, if confirmed by US Energy Information Administration data due for release mid-week, would pare back the inventory deficit to the five-year average of US EIA data to around 1.6% from 1.8% the week before.
Refinery utilization was expected to be 0.6 percentage points higher in the week, according to the survey, putting the US’ run rate at 87.2% of capacity. Seasonal turnaround work has weighed heavily on US refiners this year and despite the expectation of an uptick, run rates were still expected to be more than 3.6 percentage points below the five-year average and more than 6 percentage points lower than year-ago levels.
Weekly US data is due for release by the American Petroleum Institute later Tuesday and the US Energy information Administration on Wednesday.