Oil prices rallied on Friday, sending the global crude benchmark to the $60 level for the first time in more than two years and setting the U.S. benchmark for the commodity up for the highest finish in six months.
Prices continue to find support on speculation that the Organization of the Petroleum Exporting Countries and other major producers will agree to extend their production-cut deal through the end of the next year.
After touching a high of $60.08 a barrel, December Brent, the global benchmark LCOZ7, +1.28% remained up 60 cents, or 1%, at $59.90 a barrel on the ICE Futures exchange in London. It was poised to again settle at its highest since July 2015 and trades about 3.8% higher for the week.
On the New York Mercantile Exchange, December West Texas Intermediate crude, the U.S. benchmark, CLZ7, +1.77% tacked on 74 cents, or 1.4%, to $53.38 a barrel, ready to mark another six-month settlement high. For the week, it’s looking at a gain of around 3%.
OPEC members will hold an official meeting on Nov. 30 in Vienna. “If OPEC and its allies agree to expand the scope of production cuts, there will be a shift towards insufficient supply by 2019,” said Adrienne Murphy, chief market analyst at AvaTrade. “Brent oil will reach $60 per barrel if the cartel makes a consolidated effort to curtail its supply given the solid global demand.”
But “markets are worried that shale producers will increase output at the $60 mark, derailing efforts made by OPEC and Russia,” she said. “When oil approaches $60, traders become unnerved and start to selloff to avoid the slump.”
“We’ll need to see a major news event, like disruptions to production in Iraq, to see oil break and, most importantly, maintain the $60 mark,” said Murphy.
Later Friday, Baker Hughes BHGE, +1.40% will issue its latest report on the number of active U.S. oil rigs, a proxy for drilling activity. It’s fallen over the last three weeks.
Prices have been supported this week by data showing declines in petroleum-product stocks in the U.S. and news that Saudi Arabia and Russia—the world’s two largest crude producers—want to extend the agreement to curb output after the deal expires in March 2018, likely through the end of next year.
Read: Oil is escaping from ‘purgatory,’ as supply fears shift from glut to shortage
OPEC and some major producers outside the cartel, including Russia, first agreed late last year to cap their production at around 1.8 million barrels a day lower than peak October 2016 levels, with the aim of alleviating global oversupply and boosting prices.
Among refined products, Nymex November gasoline RBZ7, +0.55% added less than 0.1% to $1.752 a gallon, with prices for the contract trading more than 4% higher. November heating oil HOX7, +1.25% traded at $1.86 a gallon, up 1%, with a weekly rise of 3% in sight.
November natural gas NGX17, -3.29% which expires at the day’s settlement, slid 3.3% to $2.795 per million British thermal units.
“A string of production records of late have challenged any move higher” for natural gas, said Robbie Fraser, commodity analyst at Schneider Electric. “Significant strength out of both the Marcellus and Haynesville shale plays have resulted from a combination of pipeline expansions and efficiency gains, acting as a significantly bearish factor, with further growth projected ahead.”
