Oil surges through $60 a barrel level

Crude prices rise on back of tightening market and Iraq tensions plus Opec's support of an extended production cut

Brent finished at a seven-month low on Monday after the US designated China as a currency manipulator. Reuters

Oil prices jumped about 2 per cent on Friday, with global benchmark Brent crude rising above US$60 per barrel, on support among the world's top producers for extending a deal to rein in output and as the dollar retreated from three-month peaks.

Saudi Arabia and Russia declared their support for extending an Opec-led deal to cut supplies for another nine months, the Opec secretary general said ahead of the group's next policy meeting on November 30. The pact currently runs to March 2018.

Brent futures rose $1.14, or 1.9 per cent, to settle at $60.44 a barrel after hitting a session peak of $60.53, the highest since July 2015 and more than 35 per cent above 2017 lows touched in June.

US West Texas Intermediate crude oil (WTI) ended the session up $1.26, or 2.4 per cent, at $53.90 after reaching a session peak of $53.98 a barrel, the highest since early March.

For the week, Brent was 4.6 per cent higher, notching its third straight weekly gain. US crude rose 4.7 per cent for the week.

US crude's gains have lagged the global benchmark amid rising domestic output.

Oil prices have been hovering near their highest levels for this year amid signs of a tightening market, renewed support this week of an extension of production cuts and tensions in Iraq.

However, the announcement on Friday of a ceasefire between Iraqi forces and the Peshmerga from the country's autonomous northern Kurdish region eased some concerns.

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"What is interesting is that the pop in WTI futures moved above the September 28 high," said David Thompson, the executive vice president at Powerhouse, an energy-specialised commodities broker in Washington.

"So even though the dollar is giving back some of its move, crude may now be trading off of a new driver, the technical breakthrough to a new high."

The dollar trimmed its earlier gains versus a basket of currencies following reports that the US president Donald Trump is leaning toward Federal Reserve governor Jerome Powell as his pick to head the US central bank.

A weaker dollar makes greenback-denominated commodities, including oil, cheaper for holders of other currencies.

"I think the combination of short-covering and Chevron and Exxon both missing their production guidance for the third quarter has resulted in the market strength today," said Scott Shelton, an energy futures broker with ICAP in Durham, North Carolina.

Opec and other major producers including Russia have pledged to reduce production by around 1.8 million barrels per day (bpd) to drain a global supply glut.

"If Opec and their non-Opec partners can agree to extend their production curtailments through 2018, then we estimate the oil market will remain in modest under-supply until 2019," the US investment bank Jefferies said.