Oil set for longest gain this year as Libyan field Said shut

Oil headed for its longest run of gains this year as Libya’s biggest oil field was said to have suffered another outage while Russia signaled it’s weighing an extension of OPEC-led production cuts.
Futures gained for a fifth day in New York after advancing 3.2 percent last week following a U.S. military strike on Syria.

Libya’s Sharara field stopped producing just one week after it reopened, according to two people familiar with the matter, although it wasn’t clear why. Russia’s energy ministry has been in discussions with oil companies regarding the need to prolong the six-month deal when it expires, Energy Minister Alexander Novak said Friday.

Support from some members of the Organization of Petroleum Exporting Countries to extend the curbs has sparked a rally above $50 a barrel. The cuts have stabilized the market and Russia will continue to watch inventory levels, but it’s too early to decide whether the pact should be prolonged, Novak said. The pipeline carrying crude from Sharara to Libya’s Zawiya refinery stopped operating on Sunday, said the people familiar who asked not to be identified because they’re not authorized to speak to media.

Summer may be a few months away but oil investors are already getting their hopes up that American drivers will do their part to rebalance the market.

Hedge funds increased bets on higher West Texas Intermediate crude prices for the first time in six weeks, shrugging off rising U.S. supplies, as the coming driving season is expected to help ease the glut. Their wagers on more expensive gasoline jumped the most since last year, U.S. Commodity Futures Trading Commission data show.

U.S. fuel producers typically boost crude processing at this time of year as they prepare for the summer surge in demand. In a sign that they’ve already started, a government report showed refineries operating at the highest rate in about three months. Foreign refiners are also developing a taste for American barrels. Crude exports rose to a record in February as China displaced Canada as the biggest customer, Census Bureau data showed.

Oil futures touched an 18-month high on the first day of trading this year as an accord between the Organization of Petroleum Exporting Countries and 11 other producers to cut output for six months came into effect. Six members of OPEC and Oman back extending production curbs beyond June, with Saudi Arabia and Kuwait saying oil stockpiles need to fall to the five-year average.

The outlook for an extension of the accord has also helped renew optimism that prices will rebound, according to Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

"The oil bears were in retreat because OPEC appears to be complying pretty well to the quota and the likelihood that the cuts will be extended," Lynch said.

source:Bloomberg

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