Oil rises as Russia and OPEC said to reach outline deal on cuts

Oil advanced to a fresh two-year high as OPEC and Russia were said to have crafted the outline of a deal to extend their oil production cuts to the end of next year.

After days of talks, Moscow and Riyadh now agree on the need to announce an additional period of cuts at the November 30 meeting, although both sides are still hammering out crucial details, according to people involved in the conversations. Moscow had been hesitating over the need for an extension because the current deal does not expire until the end of March.

The US benchmark settled above $58/bbl for the first time since mid-2015 on heightened optimism that the Organization of Petroleum Exporting Countries and its allies will agree to prolong cuts at a November 30 meeting in Vienna. Prices are up more than 8 percent in November, heading for a third monthly gain in what would be their longest winning streak since May last year.

“Everyone is in favor of extending the deal to reach its final goals, Russia also supports these proposals,” Energy Minister Alexander Novak said.

WTI for January delivery was at $58.70/bbl on the New York Mercantile Exchange up 68 cents. The contract added $1.19 to $58.02. Brent for January settlement climbed 9 cents to $63.64/bbl on the London-based ICE Futures Europe exchange. Prices rose 23 cents to $63.55. The global benchmark crude traded at a premium of $4.94 to WTI.

Prices also strengthened as the shutdown of TransCanada Corp.’s Keystone pipeline entered its second week. The line that was shut on November 16 after an oil spill carries Canadian crude to Cushing, Okla., the pricing point for West Texas Intermediate futures.

The breakdown pushed prices of the front-month contract higher than the second month, known as backwardation. The last time the WTI futures curve consistently displayed this pattern was in 2014.

US crude inventories declined to about 457.1 million in the week ended November 17, according to the Energy Information Administration. Stockpiles at Cushing, Okla., dropped by 1.83 MMbbl to 61.2 million, the largest draw since July. Meanwhile, American production gained for a fifth week to 9.66 MMbpd.