Oil extends gains on hopes for non-OPEC output cuts

The deal can balance the market, but “we tend to cheat”, former Saudi Arabian Oil Minister Ali Al Naimi said at an event in Washington DC.

U.S. crude West Texas Intermediate (WTI) futures rose 23 cents to $US51.91 a barrel, a 0.5 per cent gain.

For the week, prices were about 12.2% higher-the largest weekly percentage gain since the week early January, 2009.

A record 580,000 crude options contracts traded on the New York Mercantile Exchange that day, while the number of puts-used by producers to guarantee a minimum price-hit the highest since 2012.

S&P Global Platts said it expects US oil stockpiles fell 1.7 million barrels last week, though the pricing agency added that the OPEC agreement “could inadvertently lead to greater USA production down the road” as prices rise.

According to its latest short-term market update, the USA watchdog seems to believe Opec’s members will honour its deal to cut 1.7 million barrels a day from its output, the agreement which sparked the recent upturn.

Most other OPEC members cutting production had a baseline month of October (except Angola).

A Gulf oil industry source familiar with Saudi oil policy said on Friday that Saudi Arabia had informed customers about lower oil supplies from January in line with the reduction in output agreed by OPEC last week.

Eastern Petroleum president Fer Martinez said the recent understanding between Opec and Russian Federation appears to suggest the “oil price may spike but it’s too early to speculate”.

“OPEC members will say, “if you (raise output), we are going to ramp up production and push oil back down to $35”. Furthermore, we expected that the lack of specifics would disappoint the market, which would result in a decline in the price of Brent crude. United States light, sweet crude settled up $US1.07, or 2.2 per cent, at $US50.84 a barrel. Once the inventory falls below the five-year average, the price will respond correspondingly.

“It may induce price increase in the local market”, Energy Secretary Alfonso Cusi said.

Opec’s new 32.5 million barrel-a-day production target is only slightly below the group’s estimate for demand for its crude next year. The global benchmark traded at a $1.83 premium to WTI for February.

Barkindo said OPEC has invited non-OPEC countries Russia, Colombia, Congo, Egypt, Kazakhstan, Mexico, Oman, Trinidad and Tobago, Turkmenistan, Uzbekistan, Bolivia, Azerbaijan, Bahrain and Brunei to a meeting on December 10 to discuss their contribution.