Markets

Oil prices rise on expectation of output cut extension

Oil prices rise on expectation of output cut extension

Oil prices rose more than 3 percent on Wednesday, bolstered by the biggest one-week drop in USA inventories so far this year, and after Iraq and Algeria joined Saudi Arabia in supporting an extension to OPEC supply cuts.

Elsewhere, investors continued to monitor comments from energy ministers, after Saudi oil chief Khalid Al-Falih said Monday, that he was "confident the agreement will be extended into the second half of year and possibly beyond".

An extension of the deal would push supply down even further in the second half of the year, the IEA's Neil Atkinson said at the Platts Crude Oil Summit in London on Wednesday.

Oil was also supported by a larger than expected fall in US crude inventories last week, down 5.8 million barrels compared with analysts' expectations for a 1.8 million barrels decline, according to industry group the American Petroleum Institute.

US light crude oil, on the other hand, ended up $1.45 higher at $47.33 a barrel.

Industry group American Petroleum Institute reported that crude prices also gained support by the fall in USA inventory, a 5.8 million barrel decline.

Aramco and other producers typically issue monthly notices to refineries and other buyers with contracted supplies outlining their intended allocations to each customer.

Global benchmark Brent crude was up 40 cents at $49.13 a barrel by 9:00am GMT.




Oil capped a third weekly decline on Friday after dropping to levels last seen before the Organization of Petroleum Exporting Countries agreed in November to reduce output.

The Opec deal reached in November helped lift prices but also breathed new life into USA producers, who have boosted drilling in shale regions and raised United States output to levels not seen since mid-2015.

"OPEC and non-OPEC members have shown commitment to production cuts and an extension of the agreement. will assist in drawing stocks over Q3 and stabilizing the market", BMI Research said in a note.

"Chief among (the) oil market's worries is that the renewed rise in USA oil production is reducing the speed at which the supply surplus is being eroded", said Fawad Razaqzada, market analyst at Forex.com told Reuters.

Falih said nearly all of the expected oil demand growth in the next 25 years was likely to come from Asia as the region's population grows, with countries such as Vietnam and the Philippines rising into the ranks of top 20 global economies.

Top exporter and de facto Opec leader Saudi Arabia said on Monday it would "do whatever it takes" to rebalance a market that has been dogged by oversupply for over two years, resulting in crude prices below $50 per barrel.

Supply from the 11 OPEC members with production targets under the accord - all except Libya and Nigeria - fell to 29.674 million bpd last month, according to figures from secondary sources that OPEC uses to monitor output.


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