Oil futures settled at their highest in a week on Tuesday, with talk of a potential output cut from the Organization of the Petroleum Exporting Countries and expectations for a decline in U.S. production combining to lift prices for the U.S. crude benchmark above $53 a barrel.
Crude for delivery in May climbed $1.38, or 2.7%, to settle at $53.29 on the New York Mercantile Exchange. The settlement was the highest since April 7 and marked a fourth straight session climb. May Brent crude on London’s ICE Futures exchange, which expires Wednesday, rose 50 cents, or 0.9%, to $58.43 a barrel.
The Wall Street Journal reported Tuesday that Iran’s oil minister has called on OPEC, at its next meeting in June, to reduce production by at least 5% to boost prices that have collapsed since last summer. “Iran would like to mitigate some of the price impact of its additional oil if the sanctions are lifted,” said James Williams, an energy economist at WTRG Economics. A Platts survey of OPEC and oil industry officials and analysts released Tuesday, however, showed that OPEC output totaled 30.72 million barrels a day in March, up 800,000 barrels a day from February and the highest monthly volume since November 2012.
Meanwhile, Monday’s drilling-productivity report from the U.S. Energy Department showed production from the seven shale regions is expected to fall by 57,000 barrels a day in May from April levels. “The rig-count reduction took many months to be associated with lower production,” said Richard Hastings, macro strategist at Global Hunter Securities, adding that some of the slowdown in output is coming from fewer well completions and possibly some shut-ins. He expects to see “further, but small contractions in crude-oil production in the coming months.” Standard Chartered said there has been some complacency in the market reaction to the collapse in U.S. drilling, and the deceleration in U.S. oil output has been greater than the market is currently pricing in. However, market observers still expect a few more weeks of rising U.S. oil stockpiles to continue as supply still outpaces demand. Later Tuesday, the American Petroleum Institute will publish its weekly oil inventory data, followed by a report from the U.S. Energy Information Administration on Wednesday.