Oil prices extend gains on output cut optimism

The overall forecast for non-OPEC countries, 11 of which have voluntarily reduced oil output to support OPEC, shows growth this year of nearly 600.000 b/d which is up from a forecast by IEA in April of 490,000 b/d.

The U.S. Energy Information Administration said on Wednesday that crude inventories USOILC=ECI fell 1.8 million barrels for the week to May 12, to 520.8 million barrels.

The market has not strengthened enough to drain many major storage facilities around the globe - which OPEC oil ministers had hoped would be a first step toward rebalancing what has been a buyer's market since late 2014. He said although prices may rise next quarter, declines could resume afterward. Crude stocks stood at a record 1.235 billion barrels.

Oil benchmarks remained in positive territory on Thursday (18 May), as the market continued to extend long trades, or bets in favour of rising prices, on robust statements from Russian Federation and Saudi Arabia in favour of extending oil production cuts. "There's sure to be a decision that will be created to boost prices".

"We have not agreed on final scenarios", said one of the sources. Prices are up 4.4 percent this week, the most since the period through March 31.

OPEC is scheduled to meet on 25 May to decide the production policy and extension of the deal by nine months. "How much is going to come out?"

But the EIA has lately reported weekly draws in inventories.

Refined fuel inventories have also jumped suddenly, with gasoil in tanks in the ARA hub rising to an eight-month high earlier this month, according to Dutch consultancy PJK International.

But the country still retained its status as Africa's top oil producer, after taking over from Nigeria recently.

More possible good news for the oil industry.

The Energy Information Administration said United States crude stocks declined for the sixth straight week.

"Crude stocks are still higher than last year's stock levels ..." Record breaking USA inventory figures in the first quarter were also weighing on the oil prices.

"If he had to go for whatever reason, USA oil demand is likely to suffer but the fall is unlikely to be significant", he said. The kingdom's vision 2030 plan depends heavily on the upcoming IPO so they are doing whatever it takes to maintain the oil prices above $50. U.S. West Texas Intermediate WTI crude rose 78 cents, or 1.6%, to $49.44 U.S. The contract is on track for a 3.5 per cent climb this week, a second week of gains.

Output slipped to 9.305 million barrels a day last week from 9.314 million in the prior week.

  • Zachary Reyes