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US crude settles at $49.33, posting weekly and monthly losses amid supply concerns

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices were higher on Friday in a see-saw session, retreating from session highs and headed for weekly declines on lingering questions about whether OPEC will extend output cuts at its May meeting.

The market also questioned whether an extension would reduce a global crude glut enough to boost prices.

U.S. oil prices have lost ground in eight of the last 11 sessions. On Thursday, prices fell sharply on news that oilfields in Libya resumed production.

Most analysts polled by Reuters expect the deal between the Organization of the Petroleum Exporting Countries and non-OPEC producers struck in December 2016 to be extended to the end of this year.

U.S. light crude settled at $49.33 a barrel on Friday, up 36 cents, on the day, but posting a loss for both the week and the month.

Benchmark Brent crude futures were trading up 27 cents at $51.71 a barrel by 2:35 p.m. ET (1835 GMT), and was also headed for weekly and monthly losses.

Non-OPEC member Russia said it would define its position on whether to support an extension of the output deal by May 24, a day before the official OPEC meeting in Vienna.

Saudi Arabia's energy minister welcomed the news, saying Russia's contribution was "good" and that overall non-OPEC compliance was 85 percent.

"OPEC ... effectively said the production cut will be extended, meeting the reality of the restart of a big Libyan oilfield and the continued expansion of U.S. shale oil," said Greg McKenna, chief market strategist at brokerage AxiTrader.

Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, said the Russia output cuts are "probably not enough because in the end there are only a few months left in the deal."

Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam, said the market sees the recent price drops as "a nice buying opportunity within the relatively small trading ranges we see."

"After all, the main drivers — OPEC production cut versus U.S. production gains — are unchanged," he said.

U.S. rig counts rose by nine to 697 total rigs on the week, according to Baker Hughes data, marking 15 straight weeks of increases.

An uptick in prices since the output deal has increased profits at U.S. oil majors ExxonMobil and Chevron. Both reported better-than-expected results, and both have plans to increase shale drilling. Jeff Woodbury, Exxon's head of investor relations, did say high inventories and new supply "indicates a need to be cautious."

France's Total and U.S. oil producers Exxon Mobil and Chevron all reported better than expected first-quarter results this week.

U.S. President Donald Trump signed an order to allow offshore oil and gas drilling in more locations, though these projects tend to take years. Offshore lease activity is now near five-year lows.

A Reuters poll showed analysts expect oil supply and demand to balance by the end of this year, if producing countries extend the output cut. Most analysts cut their average yearly price forecasts, with Brent expected to average $57.04 a barrel, compared with last month's forecast of $57.25.

The supply overhang is in part due to surging U.S. production, which has risen 10 percent since mid-2016 to 9.27 million bpd.