U.S. crude inventories slump amid near record refining

Saudi Arabia and Russian Federation have said that extending output curbs by nine months rather than the initially planned six months would help speed up market rebalancing and prevent crude prices from sliding back below US$50 per barrel.

Brent contracts for the same month, the global benchmark, were seen 0.5% lower from Wednesday's close at $54.69 - but down 1.4% from their intra-day high.

But in the longer term, there are concerns among OPEC countries that higher oil prices may end up being counterproductive as they encourage USA shale gas producers to re-enter the market - a development that could weigh on oil prices.

"There have been suggestions (of deeper cuts), many member countries have indicated flexibility but. that won't be necessary", he said, adding that global stocks were falling and Saudi exports declining. The historic pact affected everything from the valuations of USA shale producers to the foreign exchange rates of energy-dependent nations such as Brazil and Nigeria.

Even after last year's cuts, oil prices have risen less than the Organization of the Petroleum Exporting Countries hoped for.

The Opec's cuts have helped push oil back above $50 a barrel this year, giving a fiscal boost to producers.

While OPEC is unanimously supporting the idea of extending production cuts to rebalance the oil market, according to Iranian Oil Minister Bijan Namdar Zanganeh, not all non-cartel countries have made their stance clear. In the US, oil inventories dropped a seventh week while output rose, government data shows.

Asset management firm AB Bernstein said in a May 16 report that OPEC cuts would "lead to accelerated inventory drawdowns in the second half of 2017, but the return to normalized inventories will. drag into 2018". One delegate said a 12-month extension was still an option.

To take note of, in remarks to Bloomberg TV one analyst pointed out the impact that Venezuela's economic malaise was having on demand for crude and oil products, which in his opinion markets might not have accounted for properly.

Brent crude dropped as much as 2.2 percent in London and was little changed at $53.97 a barrel at 10:01 a.m.

Sushant Gupta, research director at Wood Mackenzie, told Reuters Global Markets Forum that output cuts were likely to be extended until the first quarter of 2018, and that adherence by OPEC members to the output cuts would probably remain high.

Jabbar Ali Hussein Al-Luiebi, his Iraqi counterpart, said "We support the proposal for nine months", while a committee of all nations participating in the cuts also are recommending a nine-month extension on Wednesday.

Until now Saudi Arabia were living in denial, stating they expected no U.S. shale oil response in 2017.

OPEC's current deal, agreed at the end of past year, only covers the first half of 2017.

  • Zachary Reyes