Oil prices dip as supply remains ample despite output cuts

The Energy Information Administration said Wednesday, crude oil inventories fell by 1.75 million barrels last week, which was the sixth-straight week of declining crude stockpiles but the dip in inventories fell short of expectations of a draw of around 2.4 million barrels.

Oil prices vaulted on Wednesday after data showed a decline in US stockpiles as refineries hiked output.

Oil futures rose on Friday to the highest in almost a month on growing optimism that big producing countries will extend output cuts to curb a persistent glut in crude, with key benchmarks heading for a second week of gains.

The EIA forecast that OPEC daily output in the first quarter of 2018 will average 32.99 million barrels.

But the US crude drawdown was smaller than expected and the oil market remained extremely well supplied, analysts said.

Brent crude was up 77 cents at $53.28 at 9.28 a.m. ET, its highest since April 21, while USA benchmark crude oil was up 67 cents at US$50.02.

The announcement that the deal could be extended pushed WTI crude to the psychological $50 per barrel level on Tuesday and Brent futures above $52.

Additional supply from other non-OPEC nations, like the US, has offset the cuts.

The Russian Energy Ministry says extending the cuts through March 31, 2018, would show "producers' determination to ensure stability, predictability and incremental development of the market".

The cartel is billed to meet in Vienna later this month, to discuss possible extension of output cut.

The significant increase in United States production and supplies to northern Asia has largely offset OPEC-led deal to rebalance the market.

Saudi Arabia and non-OPEC Russia have said they want an extension to output reductions of nearly 1.8 million barrels per day (bpd) that were initially agreed to run in the first half of 2017.

Among the scenarios being considered by the Opec panel were a six- or nine-month extension with a possible deeper cut, sources said.

North Sea oil output, generally seen in terminal decline, is expected to jump by a net 400,000 bpd in the next two years with new projects and greater efficiencies.

The second source also saw a modest price recovery as likely in the summer months when USA gasoline demand seasonally rises, citing factors such as a likely drawdown in inventories.

  • Zachary Reyes