Oil prices rise in Asia in expectation of Aramco supply cut
- Author: Zachary Reyes May 11, 2017,
May 11, 2017, 21:18
Gasoline and distillate stocks also fell, supporting a market that has sold off sharply in recent weeks due to persistently high United States inventories.
Global benchmark Brent futures were up 25 cents, or 0.5 per cent, at US$48.98 a barrel at 0200 GMT.
Early Wednesday, the U.S. Energy Information Administration reported (http://www.marketwatch.com/story/oil-prices-extend-gains-as-eia-reports-larger-than-expected-drop-in-us-crude-supplies-2017-05-10) that domestic crude supplies dropped by 5.2 million barrels for the week ended May 5.
OPEC boosted estimates for growth in rival supplies by 64 percent as the US oil industry's recovery accelerates, threatening the group's attempts to clear a surplus.
Oil prices rose on Monday in volatile trading, bolstered by statements from major oil-producing countries suggesting that OPEC and non-OPEC supply cuts could be extended into 2018.
An agreement led by the Organization of Petroleum Exporting Countries to calm the market with managed production declines has created economic conditions supportive of USA shale oil production gains, which is capping any major rally in crude oil prices.
The news agency reported that state-owned Saudi Aramco will reduce oil supplies to its Asian customers by almost seven million barrels next month as it is likely to witness a surge in domestic power demand over summer.
However, the Minister of State for Petroleum, Dr. Ibe Kachikwu, said recently that Nigeria would voluntarily join the cuts if its production reached 1.8 million bpd. West Texas Intermediate, the USA benchmark for the price of oil, was down 0.76 percent to $45.87 per barrel.
Crude oil prices are pulling further away from the psychological threshold of $50 per barrel. "An extension of the supply deal beyond June looks likely but its effectiveness will remain questioned", Ruecker said.
Even though OPEC has stuck to its pledge to cut production, US output has risen by more than 10% since mid-2016 to 9.3 million bbl/d, close to the output of Russian Federation and Saudi Arabia.
Floating storage has started to decline in places like Singapore.
"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 stabilising the market", BMI Research said in a note.
On average, however, Brent and WTI spot prices in April were $0.72 per barrel and $1.73 per barrel higher, respectively, than the March averages, said the report.