Nov. 30 (UPI) -- Expectations that OPEC will opt for a nine-month extension to a production cut agreement pushed oil prices higher, but gains were limited by nuance.
Parties to an agreement led by the Organization of Petroleum Exporting Countries to drain a surplus on the five-year average for global crude oil inventories continued to discuss the fate of the deal during closed-door meetings in Vienna early morning New York time. Expectations of a nine-month extension beyond the March expiration date have already been priced into the market by most accounts.
Speaking ahead of a decision on the terms of that extension, OPEC President and Saudi Energy Minister Khalid al-Falih said the surplus for global inventories was about 14 million barrels above the five-year average, a decline of almost 50 percent from May.
"I'm delighted to note that as a result of our joint efforts, the goals laid down in the Declaration of Cooperation [last year] are on track to be achieved," he said in his opening remarks.
Crude oil prices moved higher through most of the overnight trading, bouncing around 1 percent gains for most of the morning. The price for Brent crude oil, the global benchmark for the price of oil, was up 1.1 percent to $63.21 per barrel as of 9:10 a.m. EST. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.8 percent to $57.75 per barrel.
The deal, which counts on the contribution from non-OPEC members like Russia, was coordinated in November 2016, implemented in January and extended this year to March. Russia's position is important given it's reliance on oil and gas for revenue. Finance officials said oil and gas revenues were higher, though Prime Minister Dmitry Medvedev said that there's still work to do for the nation's economy given the high rate of poverty.
Elsewhere in his remarks, the Saudi minister noted that the parties to the agreement are only halfway to their goal. Demand into 2018 looks strong, he said, but noted that the closer the participants get to the goal, the more commitments can waiver.
Joe McMonigle, a senior energy analyst at Hedgeye Risk Management who attended the meeting in Vienna, told UPI the fine print of Thursday's decision matters in how a possible June review is handled. Meanwhile, he said Iraq's oil minister suggested that $65 per barrel might be too high given the likely counterbalance that would result from a surge in U.S. shale production.
Cailin Birch, a commodities Analyst at the Economist Intelligence Unit, said in commentary emailed to UPI that some parties may be looking for an exit door in an effort to preserve their market share.
"OPEC will almost be forced to extend the cuts until end-2018, as the markets have largely priced this in," Birch said. "If OPEC were to make a statement today with a vague commitment to the extension, or a shorter duration, this would likely cause a sell-off that would send prices back down below $60 per barrel."
Elsewhere, after reporting a higher rate of growth in gross domestic product than previous forecasts, the U.S. Commerce Department said personal income increased 0.4 percent in October, while spending accelerated by 0.3 percent.
For non-durable goods, the cost of prescription drugs was among the leading contributors to spending and comes as Republican leaders continue to work to dismantle the Affordable Care Act, former President Barack Obama's signature healthcare reform. For services, spending rose for passenger fares, travel and communication services.