Oil rises; producers pledge output cuts ahead of meeting

Andrew Cummings
May 20, 2017

US crude stockpiles declined 1.75 MMbbl to 520.8 MMbbl last week, down from a record 535.5 million at the end of March, according to the Energy Information Administration.

After settling on Wednesday at their highest levels in almost a month, light, sweet crude futures for delivery in June were recently down 0.3% at $48.91 a barrel in the Globex electronic session.

"I think it's still all about these ample USA supplies and the slug of oil that seems to be waiting in the wings from the shale fields", said John Kilduff, founding partner of Again Capital. West Texas Intermediate, the US benchmark price for oil, was lower than the previous close by 1.4 percent to $48.40 per barrel.

Oil prices swung between gains and losses on Thursday as investors weighed declining crude stockpiles in the USA against signs of a broader oversupplied market.

Other producers have been quick to fill any supply gaps.

"A triumvirate of draws for crude, gasoline and distillates is a supportive influence for prices", said Matt Smith, director of commodity research at ClipperData, reports Market Watch. Inventories continue to sit above five-year averages, the level that major producers want oil stocks to return to in hopes of boosting prices, which remain less than half of where they were three years ago.

"Demand for this [U.S. offshore] crude is higher in Asia, pushing Dubai prices above WTI, due to perception that OPEC members are reducing supply of heavier crude because they prefer to sell more expensive light crude to meet their quota", he said in response to emailed questions.

Crude oil inventories in the United States dropped less than expected last week, a weekly report showed on Wednesday.

OPEC and other producers made a decision to reduce oil supplies by 1.8 million barrels per day for the first half of this year.

North Sea oil shipments to Asia have also been at record highs this year, with nearly 19 tankers registered to have been shipped in Q1, and a similar amount expected to go to Asia in the second quarter.

Still, some Wall Street banks expect higher prices later in the year, with Goldman Sachs Group Inc. and Citigroup Inc. saying earlier this month that now is the time to buy oil.

Crude rebounded after Algeria said a nine-month extension to OPEC's production curbs would be backed by most participating countries.

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