Oil prices swung from one-month highs to session lows in volatile trading on Monday as investors digested signals on output policy from OPEC's two biggest producers.
U.S. West Texas Intermediate crude jumped to $51.06 a barrel in early trading, its highest level since April 19, on signs that consensus among OPEC members is forming around extending coordinated production curbs. But WTI futures gave up gains after sources told Dow Jones that Saudi Arabia and Iraq remain at an impasse over the length of that extension.
Saudi Energy Minister Khalid al-Falih flew to Baghdad to hold discussions with his Iraqi counterpart, Jabbar al-Luaibi, on Monday. De facto OPEC boss Saudi Arabia favors a nine-month extension, while the Iraqis had preferred to roll over current policy only for the remainder of 2017, the Dow Jones sources said.
However, in a press conference held shortly after 12 p.m. ET, Luaibi said he agreed it was necessary to carry over the deal for another nine months.
U.S. crude for July delivery
Falih said the decision to extend output cuts would wait until an OPEC meeting on Thursday, but he said he does not expect any objection from OPEC members to a nine-month extension, Reuters reported.
Following the statements, WTI came off session lows and slightly extended gains to trade at $50.70 a barrel.
"Going to Iraq to shore up support and push not just for six months but to push for nine months is getting the attention of the market," said John Kilduff, founding partner at energy hedge fund Again Capital.
OPEC Secretary General Mohammed Barkindo said OPEC members agree an extension is necessary but will not set a time frame until their meeting on Thursday, Dow Jones reported.
Prior to the press conference, Kilduff said he would be watching to see whether the Iraqi oil minister would be elusive in his commitment. "There are rumors that they want out of the deal. They want an exemption like the Iranians," he said.
Under OPEC's deal to remove 1.2 million barrels a day from the market in the first six months of this year, Iran is allowed to grow production to a certain level as it rebuilds its industry following years of crippling sanctions. Nigeria and Libya are entirely exempt from cutting as they restore production sidelined by internal conflicts.