Oil gains 5% as Saudi Arabia mulls extending its output cuts

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Riyadh is considering extending its voluntary oil cuts of one million barrels per day into April, Reuters news reports.

Oil prices rose nearly 5 percent on Thursday on a possible extension of voluntary output cuts by Saudi Arabia into April, as the Organization of the Petroleum Exporting Countries (OPEC) ministers and their allies continued to deliberate about the future of supply cuts.

Global benchmark Brent crude futures were up $3.04, or 4.7 percent, at $67.11 a barrel by 10:57am ET (15:57 GMT), while United States West Texas Intermediate (WTI) crude rose $2.84 or 4.6 percent at $64.12.

Ministers from the Organization of the Petroleum Exporting Countries and its allies started a meeting at 13:00 GMT to discuss the future of an oil output cut.

Saudi Arabia is considering extending its voluntary oil cuts of one million barrels per day (bpd) by one month into April, an OPEC+ source told Reuters news agency on Thursday.

“If that’s the outcome, then it’s a far cry from what the market was potentially looking for in a 1.5-million-barrel increase just a couple of days ago, so it’s a change that at least in the short term will reflect in a price bounce,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Analysts and traders say that a four-month price rally from below $40 a barrel is out of step with demand and that physical sales are not expected to match supply until later in 2021.

But with prices above $60, some analysts have predicted OPEC+ producers will increase output by about 500,000 bpd.

In the US, despite a record surge of more than 21 million barrels in crude oil stockpiles last week, gasoline stocks fell by the most in 30 years as refining plunged to a record low due to a winter-weather freeze in the oil-producing state of Texas.

Also propping up sentiment, Yemen’s Houthi forces said they had fired a missile at a Saudi Aramco facility in Saudi Arabia’s Red Sea city of Jeddah. There was no immediate confirmation from Saudi authorities.

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