Oil up on expectations of extended, possibly deeper, output cut

By Stephen Eisenhammer

LONDON (Reuters) - Oil prices rose on Monday, bolstered by confidence that top exporters will this week agree to extend supply curbs, with suggestions the cuts could even be deepened.

Brent crude gained 28 cents to $53.89 a barrel by 1337 GMT, with U.S. light crude up 30 cents at $50.63.

Both benchmarks have climbed more than 10 percent from lows earlier this month.

Prices have risen on expectations the Organization of the Petroleum Exporting Countries and other producers, including Russia, will extend for another six or nine months a deal to cut supplies by 1.8 million barrels per day (bpd).

"The decision (to extend cuts) seems to be almost a done deal," said Bjarne Schieldrop, chief commodities analyst at SEB Markets. "There seems to be a very high harmony in the group."

OPEC Secretary-General Mohammad Barkindo said on Monday that he saw a growing consensus among the group's members as well as non-OPEC producers on the duration of an extension.

The possibility of deeper cuts was also being discussed ahead of a meeting of OPEC and other producers in Vienna on Thursday, sources said.

But such talk could lead to disappointment if not approved, Commerzbank analysts said.

"If the cuts are merely to be extended, this is likely to be met at best with a neutral reception, if not even with disappointment," Commerzbank said in a note.

Some analysts argue that deeper cuts are required to balance the market, pointing to a slight rise in OPEC exports this year.

Some OPEC members are exempt from output cuts and the U.S. Energy Information Administration (EIA) expects OPEC net oil export revenues to rise in 2017, partly because of "slightly higher" OPEC output.

Deeper cuts might, however, serve to stimulate U.S. shale production, said Schieldrop at SEB Markets.

"If you cut production, it's no free lunch. You get something in the short term, but you get a backflip in the medium term, which is more production in 2018 and 2019," he said.

Goldman Sachs says that the U.S. rig count for new oil production has jumped by 404 since May last year, representing a rise of 128 percent.

U.S. oil production has already climbed by 10 percent, or almost 900,000 bpd, since mid-2016 to 9.3 million bpd.

Iraqi oil minister Jabar al-Luaibi said in a speech on Monday that OPEC's No. 2 producer had met its share of production cuts, but added that the country remains ready to meet any global demand growth that may arise.

(Additional reporting by Henning Gloystein; Editing by David Goodman and Susan Fenton)