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Oil Edges Higher As OPEC Reaches Consensus On Cut Extension

18 May 2017

The American Petroleum Institute (API) reported a drawdown of 5.789 million barrels of crude oil, for the week ending May 5, which beat analyst expectations of a fall of 1.8 million barrels.

In another bearish blow to crude oil prices, the EIA, in its Short-Term Energy Outlook said that the USA crude oil production will average 9.3 million barrels per day (bpd) in 2017 and 10 million bpd in 2018.

Also supporting prices were comments from Algeria's energy minister that Algeria and Iraq favor extending global supply cuts when OPEC meets this month.

"Chief among (the) oil market's worries is that the renewed rise in USA oil production is reducing the speed at which the supply surplus is being eroded", Fawad Razaqzada, market analyst at Forex.com, said in a note. For more on bearish drivers and crude oil prices read Part 1 and Part 2 of the series.

Supply from the 11 OPEC members with production targets under the accord - all except Libya and Nigeria - fell to 29.674 million bpd last month, according to figures from secondary sources that OPEC uses to monitor output.

Exchange-traded funds linked to oil prices, continued to climb today as crude prices remained on track to end the week in the green amid data showing that the USA crude glut is shrinking and OPEC's production cuts are making a dent in global supplies.

Brent Crude, used to price global oils, now trades at around $50 a barrel in London.

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Brent crude was up 57 cents, hovering at $50.79 per barrel, while US West Texas Intermediate jumped 61 cents to $47.94.

Official numbers on weekly US crude and product inventories from the EIA are scheduled to be released 1430 GMT on Wednesday.

While U.S. oil inventories fell, the country's crude oil production continued to rise, jumping above 9.3 million bpd last week, in what is now a more than 10 percent increase since its mid-2016 trough.

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.

Brent crude climbed 3% after latest United States oil inventories eased investor worries about the glut of oil swilling around world markets.

OPEC's efforts to tighten the market and prop up prices have been undermined by a relentless rise in USA production, especially from shale oil drillers.

Oil Edges Higher As OPEC Reaches Consensus On Cut Extension