NEW YORK: Oil prices rose on Wednesday, bolstered by the biggest one-week drop in US inventories so far this year, and after Iraq and Algeria joined Saudi Arabia in supporting an extension to OPEC supply cuts.
Concerns about rising output from the United States, Libya and Nigeria continue to weigh on markets, however, and some analysts questioned whether the sharp rebound following the US government figures would be sustained.
The US Energy Information Administration said US crude inventories fell by 5.2 million barrels last week, which was more than the 1.8 million-barrel slide analysts predicted. Gasoline and distillate stocks also fell, supporting a market that has sold off sharply in recent weeks due to persistently high US inventories.
Global benchmark Brent crude was up $1.34 at $50.07 a barrel by 11:35 a.m. Eastern time (1535 GMT). US light crude oil was $1.43 higher at $47.30 a barrel.
"US crude oil production is now solidly above 9.3 million barrels per day with more to come, and refined product, especially for gasoline, is oddly weak," said John Kilduff, partner at hedge fund Again Capital in New York.
"It is difficult to see how the day's gains last."
Brent and US light crude futures contracts closed on Tuesday at their second lowest levels since Nov. 29, the day before OPEC announced it would cut output in the first half of 2017.
Prices surged after that deal, but have come under pressure in recent weeks as US production has climbed, undermining OPEC-led efforts to balance supply with demand.
Also supporting prices were comments from Algeria's energy minister on Wednesday that Algeria and Iraq favour extending global supply cuts when OPEC meets later this month.
On Monday, Saudi Arabia's oil minister Khalid al-Falih said he expected the output deal to be extended to the end of the year or possibly longer.
State-owned Saudi Aramco will also reduce oil supplies to Asian customers by about 7 million barrels in June, a source told Reuters, as part of the Organization of the Petroleum Exporting Countries' deal to reduce production.
Aramco had previously maintained supplies to important Asian customers.
Questions remain about the effectiveness of OPEC-led cuts, with OPEC member Libya saying the country's production exceeded 800,000 barrels per day (bpd) for the first time since 2014 and could rise to 1.2 million bpd later this year.
Nigeria, which along with Libya is exempt from OPEC cuts, is also expected to see a jump in output soon as Shell tests the Trans Forcados oil export pipeline before it restarts.
Comments
Comments are closed.