Oil prices climbed Monday, with the global crude benchmark extending its push above $60 a barrel to levels not seen in more than two years and the U.S. benchmark crude ending at an eight-month high.
A surge for oil prices last week stemmed from 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. OPEC will hold its next official meeting on Nov. 30 in Vienna.
December Brent crude, the global benchmark rose 46 cents, or 0.8%, to settle at $60.90 a barrel, poised to again settle at the highest for a front-month contract since July 2, 2015, according to data from WSJ Market Data Group. The December contract, which expires at Tuesday’s settlement, rose about 4.7% last week. U.S. benchmark West Texas Intermediate crude for December delivery gained 25 cents, or 0.5%, to $54.15 a barrel. Prices saw their highest finish since Feb. 23, after gaining around 4% last week.
“Strong economic data and growing chatter about an extension of OPEC-led production cuts helped counter a big increase in [U.S.] production for oil,” said Tyler Richey, co-editor of the Sevens Report, adding that the market is also getting a boost from expectations of stronger demand. But the rally has also caused some analysts to worry that U.S. producers will now have an incentive to further boost crude output.
“Current price levels could translate to some additional production strength moving into 2018 as U.S. shale will look to respond, with early signs of a boost coming in the form of last week’s rig count, where oil rigs saw a net gain,” said Robbie Fraser, commodity analyst at Schneider Electric. Last week, data from Baker Hughes showed a modest rise of 1 oil rig, but that was the first climb in four weeks. “While a single data point hardly represents a trend, it does raise the importance of keeping a close eye on production indicators over the weeks ahead as the market questions how high prices can rise before additional barrels start to hit the market,” said Fraser, in a daily note.
Also on Nymex Monday, November heating oil ended at $1.878 a gallon, up 0.6%. The November contracts expire at Tuesday’s settlement. December natural gas tacked on less than 0.1% to $2.966 per million British thermal units.
November gasoline edged down by 0.3% to $1.764 a gallon. Prices at the retail level, however, saw the U.S. average climb Monday to mark the first weekly rise in seven weeks, according to GasBuddy. That comes ahead of Wednesday’s 12-cent state gas tax hike in California. “California taxes are unusually high, and they are about to get higher,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. But “Californians have become accustomed to paying more than $3 gallon for much of 2017.”
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