Oil edges up on Saudi pledge to make real supply cuts

Rising oil-digging activities outside of OPEC, particularly the USA, prompted UBS last week to cut its 2017 price forecast for WTI oil to $53 a barrel from $55.50.

Oil prices fell about 4 percent last week after United States data showed a surprise 3.3 million barrels rise in crude inventories to 513.2 million barrels.

Both have voiced support to the existing production cut agreement and have said that it is sufficient to rebalance the oil markets. Prices slumped on the news that they would not cut any deeper and fell further on June 7 as US stockpiles unexpectedly grew.

The West Texas Intermediate for July delivery rose 0.25 USA dollar to settle at 46.08 dollars a barrel on the New York Mercantile Exchange, while Brent crude for August delivery gained 0.14 dollar to close at 48.29 dollars a barrel on the London ICE Futures Exchange.

Oil prices edged up early on Tuesday, lifted by statements that OPEC-leader Saudi Arabia was making significant supply cuts to customers, although rising USA output meant that markets remain well supplied.

State-run oil company Saudi Aramco will supply full crude volumes to at least five Asian buyers mainly in North Asia, while lowering volumes for some customers in India, China and South Korea, the sources told Reuters on condition of anonymity.

Crude prices rose on Monday as major producers said their deal to cut output is working. However, traders instead continue to place focus on production increases in the U.S, Stratas wrote last week.

The report said: "Overall, stable demand and low volatility are the factors that should push Brent prices up by $2 or $3 in the coming weeks".

Brent and WTI futures have lost around 10 percent in value since May 25, when the Organization of the Petroleum Exporting Countries and 11 of its partners extended a restriction on supply into the first quarter of 2018. In Saudi Arabia and Russian Federation, this share is much greater, as those countries produce lesser amounts of natural gas plant liquids, and they also have much smaller volumes of refinery gain and biofuels production.

On Sunday Qatar said it would stick to the OPEC agreement to cap output. The U.S. Energy Information Administration says that figure will likely rise above 10 million bpd by next year, challenging top exporter Saudi Arabia. Libya and Nigeria are exempt from OPEC's production cut agreement. Other buyers did not seek extra supplies after Aramco raised prices more than expected. Sentiments in the financial markets of course swing like a pendulum.

  • Carolyn Briggs