* OPEC, other producers meet on Thursday to discuss output
* Current production cut was initially to cover only H1 2017
* Expectation is for production cut to be extended into 2018
* Rising U.S. production threatens to undermine OPEC-led
By Henning Gloystein
SINGAPORE, May 25 Oil prices rose ahead of an
OPEC meeting on Thursday that is expected to extend a production
cut aimed at tightening the market well into 2018, adding at
least nine months to an initial six-month cut in the first half
of this year.
Brent crude futures were trading at $54.40 per
barrel at 0118 GMT, up 44 cents, or 0.82 percent from their last
U.S. West Texas Intermediate (WTI) crude futures were
at $51.76, up 40 cents, or 0.78 percent.
Both benchmarks have risen more than 16 percent from their
Prices have risen on a consensus that a pledge by the
Organization of the Petroleum Exporting Countries (OPEC) and
other producers, including Russia, to cut supplies by 1.8
million barrels per day (bpd) would be extended into 2018,
instead of just covering the first half of this year.
The production cut, introduced in January, was initially
only to cover the first half of 2017, but an ongoing glut has
meant that OPEC and its allies who are meeting in Vienna on
Thursday are expected to extend the cut by nine or potentially
even 12 months.
"A strong consensus has developed that producer supply cuts
will be extended. The only question is the choice of the
duration," French bank BNP Paribas said.
"This (extension) has been highly factored into the price of
oil, and at this stage it is unlikely that we will see a
deepening in the level of production cuts, with OPEC officials
preferring to wait and see the impact of an extension in helping
rebalance the market prior to taking any more drastic actions,"
said James Woods, analyst at Australia's Rivkin Securities.
Energy consultancy Wood Mackenzie said "a nine-month
extension would have little impact on our price forecast for
2017, which is for an annual average of $55 per barrel for
Wood Mackenzie estimated that a nine-month extension would
result in a 950,000 bpd production increase in the United
States, undermining OPEC.
U.S. oil production C-OUT-T-EIA has already risen by more
than 10 percent since mid-2016 to over 9.3 million bpd as its
drillers take advantage of higher prices and the supply gap left
by OPEC and its allies.
Should the meeting in Vienna result in a cut extension to
cover all of 2018, Wood Mackenzie said the tighter market could
push average 2018 Brent prices up to $63 per barrel.
Brent has averaged $53.90 per barrel so far this year.
Should the meeting in Vienna fail to agree an extended cut,
traders expect oil prices to fall as this would result in
(Reporting by Henning Gloystein; Editing by Joseph Radford and