OPEC Plans To Extend Limits

Stockpiles of gasoline, one of the products that crude is refined into unexpectedly fell by 150,000 barrels, against expectations for a build of 65,400 barrels.

Oil prices gave up early gains yesterday, as the market weighed news from Opec and other producers about prolonging output cuts against data showing the recovery in U.S. drilling had extended for a year.

OPEC will decide formally whether to extend the cuts when its ministers meet in Vienna on May 25.

But global inventories remain high, pulling crude oil prices back below US$50 per barrel and putting pressure on OPEC to extend the cuts to the rest of the year.

Oil prices rose on Wednesday after a larger than expected fall in United States crude inventories and on attempts by Opec to rebalance an oversupplied market by cutting output.

But after Brent prices fell back below $50 a barrel last week, analysts said producers felt forced to act.

Brent for July settlement was 12 cents higher at $49.46 a barrel on the London-based ICE Futures Europe exchange.

Oil prices had recently collapsed to their lowest since late November as investor anxious about the world's stubbornly persistent glut of crude erased most of the gains that followed last year's OPEC's output cut.

"Chief among (the) oil market's worries is that the renewed rise in U.S. oil production is reducing the speed at which the supply surplus is being eroded", said Fawad Razaqzada, market analyst at Forex.com told Reuters.

"We need to see the OPEC/non-OPEC deal extended to 2018, otherwise there's a risk oil prices will fall below US$40", Alexandre Andlauer, an analyst at AlphaValue SAS in Paris, said by email.

On May 10, 2017, the EIA (U.S. Energy Information Administration) will release its crude oil inventory report for the week ending May 5, 2017.

State-owned Saudi Aramco will reportedly reduce oil supplies to Asian customers by about seven million barrels in June, as part of the Organization of the Petroleum Exporting Countries' agreement to reduce production.

Russian Federation said yesterday it was discussing prolonging cuts with other producers beyond 2017, without giving a clear timeline.

News that the curbs may be extended into 2018 fuelled a short-lived rally in the market, but oil gave up the gains quickly amid pessimism on how long it will take to drain brimming oil inventories.

While prices surged immediately after the agreement, in recent weeks they have come under sustained pressure as US production has ramped up.

Two OPEC members are exempt from the cut-Nigeria and Libya- and a third member, Iran, was allowed to boost output to a specified level.

  • Zachary Reyes