NEW YORK (Reuters) - Oil prices rose about 2 percent on Thursday as signs Saudi Arabia and Russia would limit production through next year pushed the U.S. benchmark back above $50 a barrel.
The news outweighed Wednesday’s U.S. data showing record U.S. exports and the return of production at a major Libyan oilfield.
Brent futures LCOc1 settled at $57 a barrel, up 2.2 percent, or $1.20, while U.S. crude CLc1 rose 81 cents, or 1.6 percent, to end at $50.79.
Russian President Vladimir Putin said this week that a pledge by the Organization of the Petroleum Exporting Countries and other producers, including Russia, to cut oil output to boost prices could be extended to the end of 2018, instead of expiring in March 2018.
Russian Energy Minister Alexander Novak said on Thursday that Moscow would support new countries joining the agreement to restrict oil supply.
“Putin and Salman will most likely reach, but not announce, an agreement to extend the OPEC/non-OPEC production deal, though with a commitment to taper the cuts,” said Eurasia Group.
President Donald Trump was expected to announce soon that he will decertify the landmark international deal to curb Iran’s nuclear program, a senior administration official said on Thursday, in a step that could lead to renewed U.S. sanctions against Tehran and could limit Iranian sales of oil.
“It would make it difficult for barrels to be transacted through U.S. dollars,” said Bernadette Johnson, vice president of market intelligence at Drillinginfo.com in Denver. “A lot would continue to flow, but that’s probably a million barrels that is at risk.”
With the increase in prices to above $50, producers have started hedging more heavily, said Johnson.
That would buffer drillers against losses if the price were to decline, which may spur more U.S. production - partially offsetting the OPEC-led deal to cut supply by about 1.8 million barrels per day (bpd).
Other factors also weighed on oil prices, including the return to production of Libya’s Sharara oilfield on Wednesday after an armed brigade forced a two-day shutdown.
U.S. crude oil exports jumped to 1.98 million bpd last week, surpassing the 1.5 million bpd record set the previous week, the Energy Information Administration said.
The increase followed a widening of the discount for U.S. crude against Brent WTCLc1-LCOc1, making U.S. oil attractive on world markets.