Oil prices extend gains after big U.S. inventory draw

Oil prices rose yesterday, with benchmark Brent crude trading at 50.92 dollars a barrel after a fall in USA inventories and a bigger-than-expected cut in Saudi supplies to Asia helped tightened the market.

On the New York Mercantile Exchange crude futures for June delivery rose 0.10% to $47.88 a barrel, while on London's Intercontinental Exchange, Brent was last quoted up 0.08% to $50.81 a barrel. Brent settled at $US50.77, up 55 cents or 1.1 per cent. It was the highest closing price in a week for both benchmarks.

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Amid reports of an Organization of the Petroleum Exporting Countries (OPEC) production cutback consensus reaching fever pitch and the market responding accordingly, Vitol delivered a one-two punch to optimists by reminding them that the oil market is not seeing a de-stocking that was expected and that US shale continues to grow faster than anyone expected. Inventories of refined products also fell.

OPEC members agreed in November to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices.


"The market is in flux because we've all traditionally said there is this huge price regulator sitting there, that has been OPEC, and I think that model is severely challenged today", he said.

M - Turkmenistan is likely to join an OPEC-led cut in oil supply aimed at supporting prices, sources in OPEC and the industry said, potentially enlarging the output reduction slightly, Reuters reported.

On 25 May, Opec will meet to determine policy for the second half of 2017.

OPEC's revision is largely based on higher production in the United States, where producers who rely on expensive advanced drilling methods have become more profitable as prices rise.

Total non-OPEC growth rose to 580,000 barrels in April; U.S. production accounted for the bulk of non-OPEC growth around 540,000 barrels, or 93%.


U.S. crude oil production has already risen by over 10 percent since its mid-2016 trough, to more than 9.3 million bpd, close to levels of top producers Russian Federation and Saudi Arabia.

Opec also said it sees more supply coming from non-member countries such as the US.

Optimism was also fuelled by the Organization of the Petroleum Exporting Countries' report that showed cartel members were sticking to the production quotas. Egypt's oil consumption outpaces its production, which is estimated at 700,000 bpd.

"You're going to have to have a few weeks of 5 million-barrel draws just to get back to square one", he said.



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