Oil flirts with $59 as Russia, OPEC said to outline deal on cuts

Oil on Friday briefly surpassed $59 a barrel in New York for the first time in two years as OPEC and Russia were said to have crafted the outline of a deal to extend their oil production cuts.

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Futures closed 1.6 percent higher, just 10 cents below a fresh two-year high. After days of talks, Moscow and Saudi Arabia now agree on the need to announce an additional period of cuts at their meeting next Thursday, 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 doesn't expire until the end of March.

"Russia has been scared of higher prices and has been sort of unwilling to commit to a nine-month" extension of cuts, said Sam Alderson, analyst at Energy Aspects in London. Oil market strength comes from "the more positive signs from Russia."

Also affecting prices was the shutdown of the Keystone pipeline, which is expected to last for several weeks. Without the pipeline, oil inventories will lose more 500,000 barrels a day, more than enough to stir optimism in the market, said Andy Lipow, an analyst and Lipow Oil Associates. The TransCanada Corp. pipeline was shut down last week after it leaked 5,000 barrels of oil, roughly 210,000 gallons, in South Dakota. The line carries Canadian crude to Cushing, Okla., the main pipeline and storage tank hub in the U.S.

"It's a fluke that is significantly impacting the price of West Texas Intermediate," he said Friday. "And combine that with continue inventory declines here in the U.S., that's painting a picture of somewhat higher prices in 2018."

The U.S. benchmark this week has traded at levels last reached in mid-2015 on heightened optimism that the Organization of the Petroleum Exporting Countries and its allies will agree to prolong cuts until the end of next year. Prices are up more than 8 percent in November, heading for a third monthly gain in what would be the 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 told RBC TV.

Novak and minister from other top exporting countries gathered at a summit in Bolivia this week before their meeting in Vienna. Venezuelan President Nicolas Maduro said at the sidelines of the event that "the path" taken by OPEC and its allies must continue.

"It is good news the use of these spaces of permanent dialog to reach agreements to continue establishing the prolonged stability of oil prices," he said.

West Texas Intermediate for January delivery rose by 93 cents to $58.95 a barrel on the New York Mercantile Exchange, after touching $59.05.

There was no settlement Thursday because of the Thanksgiving holiday in the U.S., and all transactions will be booked Friday.

Brent for January settlement climbed 31 cents to $63.86 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $4.91 to WTI.

The oil market is being driven by Russia, said Phil Flynn, senior market analyst at Price Futures Group. The oil producer has been sending mixed signals.

"At the end of the day, Vladimir Putin kind of favored" an extension, Flynn said. "It's definitely supportive of the market."