Oil rebounds from one-month low on hopes for output cut extension

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Oil prices rebounded on Friday after dropping to a one-month low the previous day, prompting investors to buy at cheaper levels ahead of a May OPEC meeting at which producers could extend output cuts.

Optimism is rising about the prospect of a year-long production curb deal, with most analysts polled by Reuters expecting the accord between the Organization of the Petroleum Exporting Countries and non-OPEC producers, struck at the end of last year, to be extended to the end of the year.

“OPEC ... effectively said the production cut will be extended, meeting the reality of the restart of a big Libyan oilfield and the continued expansion of US shale oil,” said Greg McKenna, chief market strategist at brokerage AxiTrader.

Friday’s oil price gains were also helped by a weaker dollar and signs that non-OPEC member Russia was fully compliant with output limits agreed among major producers late last year.

Benchmark Brent crude futures were trading up 44 cents at $51.88 a barrel by 1150 GMT. US light crude fetched $49.55 a barrel, up 58 cents.

Despite Friday’s gains, both contracts were set for their second straight weekly and monthly losses after Thursday’s price drop driven by news of the oilfield restarts in Libya.

“The markets see such a price drop as a nice buying opportunity within the relatively small trading ranges we see,” said Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam.

“After all, the main drivers - OPEC production cut versus US production gains - are unchanged.”

A Reuters poll published on Friday showed analysts expect oil supply and demand could fall into balance by the end of this year if producers agree to extend the output cut.

Nevertheless, most cut their average yearly price forecasts for Brent and WTI futures.

The Reuters survey of 35 economists and analysts forecast that Brent crude would average $57.04 a barrel in 2017, compared with last month’s forecast of $57.25 and an average so far this year of about $55.

With producers’ compliance with the output deal still a major price driver, comments from Russia that it had cut by 300,000 barrels per day (bpd) also supported trading on Friday.

Saudi Arabia’s energy minister welcomed the news, saying Russia’s contribution was “good” and that overall non-OPEC compliance was 85 percent.

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