WTI, Brent crude oil futures settle higher

Owen Stevens
May 20, 2017

Higher crude output from the USA should pressure global oil prices through the end of 2018, the US government said May 9, ahead of a meeting later this month at which OPEC and non-member producers will discuss extending supply cuts.

The producer group and other major suppliers including Russian Federation agreed a year ago to cut their collective production by about 1.8 million barrels a day for the first half of 2017 in an effort to reduce bloated global stockpiles and re-balance the market.

US oil production has risen more than 10 percent since mid-2016 to 9.3 million bpd, the highest since August 2015 and close to the levels of top producers Russian Federation and Saudi Arabia.

Iraq and Algeria said they were in favor of extending that deal, which cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year.

In the report, OPEC pointed to continued high compliance by its members with the supply cut deal and said oil stocks in industrialised nations fell in March - although they are still 276 million barrels above the five-year average.

News of a possible extension of the OPEC cuts and reports that USA crude stockpiles have dropped by 5.2 million barrels last week slightly boosted worldwide oil prices.

U.S. West Texas Intermediate (WTI) crude oil futures were trading at $46.87 per barrel, up 65 cents, or 1.4 percent from the last close.

Crude prices rose further in Asia on Thursday, building on overnight gains following an upbeat report on USA inventories.

Saudi Arabia and Russian Federation, in response to the surge in United States shale production, have signalled they intend to continue to extend the deal reached to cut production by 1.8 million barrels per day in November.

Global benchmark Brent futures LCOc1 were up 19 cents, or 0.4 percent, at $48.92 a barrel at 0612 GMT.

Ahead of a May 25 meeting of the cartel where its members and Russian Federation are expected to roll over an agreement to cut production, OPEC said in its monthly market report that common policies were needed for market stability.

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.

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

State-owned Saudi Aramco has told Asian buyers it is curtailing supplies for June to meet its commitments for the output cut, one of the sources at a refiner in South Korea said.

"US oil production surpassed expectations in terms of an early bottoming and swift uptick, and is set to expand further based on the latest drilling momentum", said Norbert Ruecker, head of macro and commodity research at Julius Baer.

Adeeb Al-Aama said that conviction is growing among members for output cut extension.

There were also underlying concerns surrounding the increase in output in Nigeria and Libya, especially as these two countries do not have an OPEC-imposed output limit.

Other reports by VgToday

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