Oil Edges Higher as Saudi-Russia Encounter Reassures Oil Bulls

(Bloomberg) -- Oil climbed as Saudi Arabia and Russia, the world’s biggest oil exporters, signaled continued cooperation on efforts to erode a global crude glut.

Futures rose 1.6 percent in New York as Saudi King Salman bin Abdulaziz made a historic trip to see Russian President Vladimir Putin. The king expressed a desire to maintain output caps agreed to with Russia and other producers 10 months ago. Meanwhile, drillers in the U.S. Gulf of Mexico began evacuating platforms as a storm approached, just a day after a the government disclosed record-high overseas demand for American crude.

“What we are seeing is Saudi Arabia and Russia singing from the same song sheet, both countries praising the producer-supply restraint,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone.

Though a September rally pushed the benchmark U.S. crude grade into a bull market, some of those gains have been surrendered despite adherence to production limits by the Organization of Petroleum Exporting Countries and allied suppliers. A possible extension of the deal “should be at least until the end of 2018,” Putin said on Wednesday.

Meanwhile, Tropical Storm Nate swirled off the coast of Nicaragua and prompted oil explorers to shut platforms in the Gulf of Mexico. Hess Corp. limited offshore travel in the area while BP Plc evacuated workers from two platforms. The Gulf accounts for about 17 percent of U.S. crude output.

West Texas Intermediate for November delivery climbed 81 cents to settle at $50.79 a barrel on the New York Mercantile Exchange.

Brent for December settlement gained $1.20 to settle at $57.00 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.85 to December WTI.

Cooperation between Saudi Arabia and Russia has “breathed life back into OPEC” and made the kingdom more optimistic about the outlook for oil than it has been for several years, Saudi Minister of Energy and Industry Khalid Al-Falih said at the start of Salman’s visit to Russia.

“You’ve got rumors that OPEC’s going to extend production cuts and Russia seems to be okay with that, so that can easily put a bid under the market,” Rob Haworth, who helps oversee $142 billion in assets at U.S. Bank Wealth Management in Seattle, said by telephone. “This is a market where the bias is still to the upside from a sentiment perspective among speculators and they are going to continue to test that thesis.”

Oil-market news:

TransCanada Corp. has scrapped its Energy East Pipeline and Eastern Mainline projects, oil and natural gas conduits that have faced regulatory hurdles in Canada and stiff opposition from environmental groups.

--With assistance from Serene Cheong, Stephen Stapczynski and Grant Smith.To contact the reporters on this story: Jessica Summers in New York at jsummers24@bloomberg.net ;Meenal Vamburkar in New York at mvamburkar@bloomberg.net To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Joe Carroll, Stephen Cunningham


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