Oil continued to climb on Monday, sending the price to the highest level in a month. Expectation for an extension of output cut is the main reason for the rally.
Brent Crude for July settlement rose 0.97 percent to $54.13 a barrel on the London-based ICE Futures Europe exchange. While the West Texas Intermediate Crude for June delivery rose 55 cents, or 1.09 percent to 50.88 a barrel.
Oil rose as investors had anticipated that the Organization of the Petroleum Exporting Countries and other non-OPEC members will extend the deal for another six or nine months to cut supplies by 1.8 million barrels per day (bpd).
“OPEC and some non-OPEC producers are highly likely to maintain cuts for another six to nine months and this is likely to drive global oil inventories down towards normal at the end of 2017,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “But if the U.S. market keeps adding 30 rigs a month till then, production is likely to grow by 2.3 million barrels a day, putting a downside price risk on 2018 and 2019.”
The possibility of production cut will be discussed in the OPEC meeting in Vienna on Thursday.
But investors are concerned about that a long extension to the cuts could further encourage U.S. shale output.