Oil prices up on US drawdowns, support for OPEC cuts

Oil prices

Oil prices rose in trading on Thursday following EIA data showing a decrease in US crude stocks and enthusiasm for extending OPEC supply cuts into the second half of the year. Anadarko photo.

Oil prices up over 1 per cent

Oil prices rose over 1 per cent in trading on Thursday on reports of bigger-than-expected drawdowns of US crude inventories and growing support for extending OPEC supply cuts.

Brent ended the day up by 55 cents to $50.77/barrel by 12:07 p.m. EDT, after hitting a high of $51.16.  US light crude was up 50 cents to $47.83.

“People are hinging the optimism today on the recent drawdown in inventories and I think that might last as long as we don’t have another inventory build,” Stewart Glickman, head of energy research at CFRA Research told Reuters.

On Wednesday, the US Energy Information Administration reported the biggest weekly drawdown in US crude inventories since December. Imports dropped sharply and inventories of refined products also slumped.

According to a report issued by OPEC on Thursday, cartel output fell in April, however, Saudi Arabia’s output rose.  Riyadh says the kingdom is drilling less than agreed upon under the deal.

On May 25, OPEC will meet in Vienna to discuss the possible extension of the supply cut deal to the end of 2017 and possibly into the first quarter of 2018.

Recently, a number of major crude producers have voices support for prolonging the pact.  Iraq and Algeria have said they are in favor of extending the deal, which reduced global crude production by 1.8 million barrels per day (b/d) so far this year.

Non-member nations Turkmenistan and Equatorial Guinea have also agreed to join the agreement, but they are smaller producers and the impact of their reductions will be minimal.

Equatorial Guinea, Africa’s third largest oil producer, says it has support from Saudi Arabia to join OPEC.

Despite high compliance with the OPEC supply cuts, the global crude glut stubbornly hangs on and other producers, including US shale operations, have boosted drilling as oil prices have risen.

According to OPEC, the total oil supply growth from non-OPEC producers this year is 950,000 b/d, from a previous forecast of 580,000 b/d. Last week, US production was up to over 9.3 million b/d, the highest since August, 2015.

 

 

 

 

Posted in: Energy Financial

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