This Flip-Flop At Key Oil Meeting Adds To OPEC Confusion

"Libya oil production is proving to be a lot less reliable, and that makes [an] extension of OPEC production cuts look more bullish", said Phil Flynn, senior market analyst at Price Futures Group.

At the end of November, the Organization of Petroleum Exporting Countries agreed to cut output by 1.2 million barrels per day (bpd) from January 1, initially for a period of six months.

Oil prices extended gains on Wednesday despite an increase in US crude inventories, lifted by Libyan supply disruptions and expectations of an OPEC-led output cut being extended.

"UAE production cut for March and April will be more than 139,000 bpd due to the maintenance activities, which means more than 100 per cent compliance", Al Mazroui said.

Reuters reported that prices for front-month Brent crude futures, the worldwide market benchmark, gained 55 cents to $51.30 per barrel yesterday, while West Texas Intermediate (WTI) futures, the U.S. benchmark, were up 50 cents at $48.23 a barrel. They are now around $48.

USA crude exports are poised to pick up, analysts and traders said, as rising domestic production has pushed WTI's discount to Brent to its steepest since the United States lifted a ban on exports in late 2015.

It is now up to market participants to decide if the extension of the production cuts is enough to lift oil prices.

Given the recent fuel supply overhand and rising USA drilling output cuts, we can say that the global oil markets were gradually recovering due to a strong demand growth.

Oil inventories are high because of low U.S. demand and higher supply, and the market should rebalance in the second half of the year, Opec secretary-general Mohammad Barkindo said in Kuwait.

Brent crude futures settled US$1.09, or 2.1 per cent, higher at US$52.42 a barrel after hitting a session high of US$52.46, the highest since March 16.

The price of May futures for Brent crude oil has increased by 0.92 percent to $51.80 per barrel as of 04:27 EST.

Analysts polled by Reuters ahead of weekly data forecast United States crude oil stocks rose 1.2-million barrels last week to a fresh record. Therefore, the western media is once again making hue and cry that unless OPEC extends the curbs beyond June or makes bigger cuts, oil prices are not likely to improve.

U.S. oil drillers boosted the rig count to 631 last week, the most since September 2015, Baker Hughes data show.

This wouldn't explain how US inventories kept on growing before maintenance season, however, so it's more likely than not that Gulf producers are trying their best to arrest the price slide, and the situation in Libya is helping.

  • Zachary Reyes