OPEC slashes output in March, expects shale comeback

In its new monthly oil report on Wednesday, OPEC pointed to an uptick in demand anticipated in 2017.

The bank forecasts US oil production increasing between 700,000 and 800,000 bpd next year, and continued growth from deepwater oil formations and the oilsands.

At the same time, EIA estimates that USA crude oil refinery inputs averaged 16.7 million barrels per day during the week ending April 7, or 268,000 barrels per day more than the previous week's average.

Meanwhile, Brent's premium to the WTI crude contract stood at $2.76 a barrel by 10:42AM ET (14:42GMT), compared to a gap of $2.83 by close of trade on Tuesday.

To comply with the deal, Saudi Arabia has cut production of medium-heavy oil to keep its overall output lower. A survey of sentiment from S&P Global Platts finds there may be a build in USA crude oil inventories of 125,000 barrels from last week, but a decline of 1.8 million barrels for gasoline.

"U.S. oil production rose to the highest level in over a year, leaving oil prices weaker on the day after the U.S. EIA released its data".

Later Tuesday investors will be watching for a USA inventory and production estimate from the industry group the American Petroleum Institute. A final decision on whether or not to extend the deal beyond June will be taken by the oil cartel on May 25.

West Texas Intermediate for May delivery was at $53.51 a barrel on the New York Mercantile Exchange, up 11 cents, at 1.40pm in Singapore.

"Despite some downside risks, general expectations for demand growth for oil products in the coming months remain bullish", said the report, which made a minor upward revision to its global demand forecast this year.

The EIA believes that burst of oil could weigh on oil prices.

The gain in oil prices comes despite rising US shale oil production.

OPEC reduced its output to around 1.2 million barrels per day from the beginning of January and for six months - the first curb in eight years - to get rid of excess supply.

One of those unintended consequences was that Canadian and American energy companies hedged their production at higher oil prices then accelerating their drilling plans "guaranteeing a surge in US production growth from the beginning to the end of 2017 of at least 800,000 bpd".

Reuters reported that Brent crude futures climbed 20 cents to touch $56.43 per barrel, the highest since early March.

Russia's oil production will reach a record high of 549 million tons in 2017 despite a planned output reduction, the country's Energy Minister Alexander Novak said Wednesday.

  • Zachary Reyes