Oil prices rose nearly 3% on Friday, climbing further from five-month lows hit this week after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June and as Wall Street rallied.
Brent crude futures gained $1.62, or 2.6%, to settle at $63.29 a barrel. U.S. West Texas Intermediate (WTI) crude ended at $53.99 a barrel, up to $1.40, or 2.7%.
Brent posted its third weekly decline, dropping nearly 2%, while WTI gained about 1% for the week. On Wednesday both benchmarks hit their lowest since January.
Saudi Energy Minister Khalid al-Falih told a conference in Russia that the Organization of the Petroleum Exporting Countries (OPEC) and its allies should extend oil production cuts.
He said that while OPEC was close to an agreement, more talks were needed with non-OPEC countries that were part of the deal to reduce output by 1.2 million barrels per day (bpd), which runs out at the end of this month.
Supply has also been limited by U.S. sanctions on oil exports from Venezuela and Iran. On Thursday, Washington tightened pressure on Venezuela’s state-owned oil company by making clear that exports of diluents by international shippers could be subject to sanctions.
In the United States, energy firms this week reduced the oil rig count to the lowest since February 2018. Drillers cut 11 rigs in the biggest weekly decline since April, bringing the total count down to 789, General Electric Co’s Baker Hughes energy services firm said.
Oil prices were also supported by a rise in equity markets after a sharp slowdown in U.S. job growth raised hopes of an interest rate cut by the Federal Reserve.
“What we’ve seen is global central banks are ready to respond to a slowdown in the economy,” said Phil Flynn, an analyst at Price Futures Group in Chicago. “In the U.S., if that’s the case, we’re going to see more stimulus added to the market.”
But investors are still worried about trade tensions that could stall the global economy, including the dispute between the United States and China.
The United States has also threatened tariffs on goods from major trading partner Mexico. U.S. President Donald Trump said on Friday there was a “good chance” the United States would make a trade deal with Mexico, but that if the two countries failed to make an agreement a 5% tariff would be imposed on Mexican imports on Monday.
Because of weak economic data and the widening trade conflict, Commerzbank revised their third-quarter forecast for Brent down to $66 from $73 a barrel.
Hedge funds and other money managers cut their net long U.S. crude positions last week as prices plunged, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.
The speculator group cut its combined futures and options position in New York and London by 13,196 contracts to 198,884 during the week to June 4.