Oil just cracked $50 a barrel for the first time in three weeks

Posted by jbrumley on May 19, 2017 11:28 AM

By Tom DiChristopher, CNBC

U.S. crude surged above $50 a barrel for the first time in more than three weeks, as a report surfaced that OPEC members are considering cutting production more deeply to tackle a persistent supply glut that has weighed on prices.

U.S. West Texas Intermediate crude futures for June delivery were more than 2 percent higher at $50.37 a barrel shortly after 11 a.m. ET. That put WTI above the key level of $50.22 a barrel, the high for the week of April 24 — just before oil prices broke below a number of technical levels, culminating in a "flash crash" to $43.76.

Most of Friday's trading volume was in futures for July deliver, which will soon take over as the front-month contract. July WTI was trading solidly above $50 a barrel.

U.S. West Texas Intermediate Crude for July delivery
051917-oil

Oil prices are now on pace for a second weekly gain. Analysts told CNBC a rally on Monday was primarily driven by short-covering — or closing bets that oil prices would fall further — after top oil producers Russia and Saudi Arabia agreed to extend production cuts among two dozen exporters through March 2018.

Friday's rally appears to be driven by new bullish bets, as those looking to cover shorts already closed those positions earlier this week, said Andy Lipow, president at Lipow Oil Associates.

"The rally really is all on the back of the anticipation of what OPEC is going to do next week," he said.

OPEC members meet on Thursday to determine whether to roll over their deal to remove 1.2 million barrels a day from the market in order to shrink historic global crude stockpiles. The goal is to get the worldwide inventory level back down to the five-year average, something OPEC has failed to do so far this year.

"The heavy lifting has been done by Saudi Arabia, so they actually could get more production cuts if the rest of them would comply better with the rest of the original agreement," Lipow said.

However, oil prices still remain in a range in which they are vulnerable to profit-taking.

"For the bulls to regain the full upper hand, a close over $50 is what we need," John Kilduff, partner at energy hedge fund Again Capital, told CNBC earlier this week.

From CNBC

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