Oil rises as countries join OPEC cuts, United States inventory falls

Crude prices rose further in Asia on Thursday, building on overnight gains following an upbeat report on USA inventories. U.S. crude oil inventories fell 1% week-over-week, but rose 2.6% year-over-year.

The Organization of the Petroleum Exporting Countries and other producers including Russian Federation have agreed to cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year to try to reduce a global fuel glut.

“US crude oil production is now solidly above 9.3 million barrels per day with more to come, and refined product, especially for gasoline, is oddly weak”, said a partner at hedge fund Again Capital in New York, John Kilduff.

“It is hard to see how the day’s gains last”.

OPEC is set to give further talks on May 25, concerning of whether to extend the settlement to cut production output for an additional six-months before the year ends.

But prices, however, slumped in recent weeks due to rising US production, which undermined the OPEC-led efforts to reduce a global crude glut.

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”.

In recent days major producers have voiced support for extending last year’s deal from the Organization of the Petroleum Exporting Countries and other producers to cut supply.

Due to the higher supply expected from outside producers, OPEC trimmed forecast demand for its crude in 2017 to 31.92 million bpd, down 300,000 bpd from the previous forecast and not far from current production. “With demand continuing to surprise to the upside”, the global supply deficit may be as wide as 2 million barrels a day by July, he said at the S&P Global Platts Global Crude Summit in London on Wednesday. Two OPEC members are exempt from the cut-Nigeria and Libya- and a third member, Iran, was allowed to boost output to a specified level.

India’s HPCL had provisionally booked the VLCC Dalian to load Qua Iboe in June, according to shipping fixtures.

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“A bigger than expected drop in oil and fuel stocks received the initial bullish attention”.

This post was syndicated from SIGNAL.

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