Oil rises as countries join OPEC cuts

Gladys Abbott
May 20, 2017

The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is the de-facto leader, and other producers including Russian Federation pledged to cut output by 1.8 million barrels per day (bpd) in the first half of the year to boost the market.

US crude stockpiles have declined for four weeks after reaching the highest level in more than three decades at the end of March.

On the New York Mercantile Exchange, crude futures for June delivery climbed 0.49% to settle at $47.56 a barrel, while on London's Intercontinental Exchange, Brent added 0.44% to end at $50.44 a barrel.

Oil prices rose on Thursday, with global benchmark Brent crude trading comfortably above $50 a barrel after a fall in USA inventories and a bigger-than-expected cut in Saudi supplies to Asia helped tightened the market.

"Higher oil production from the United States, along with rising oil output from Canada and Brazil, is expected to curb upward pressure on global oil prices through the end of 2018", said EIA Acting Administrator Howard Gruenspecht, in a statement.

Oil prices had recently collapsed to their lowest since late November as investor anxious about the world's stubbornly persistent glut of crude erased most of the gains that followed last year's OPEC's output cut.

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The EIA is forecasting an average USA pump price for 2017 of $2.39 per gallon of regular gasoline, down seven cents from the previous forecast.

He said he's confident that the global oil market will soon rebalance and return to a "healthy state". Russian Federation and 10 other non-OPEC producers agreed to cut half as much.

Prices surged immediately after the agreement, but have come under sustained pressure in recent weeks as USA production has ramped up and pushed back the expected timing for when the oil market will come into balance. Atkinson said such a move will see the supply deficit become even bigger in the second half of the year.

The 13-country OPEC is curbing its output by about 1.2 million bpd from January 1 for six months, the first reduction in eight years.

USA oil production continued to rise, jumping above 9.3 million bpd last week, the highest since August 2015.

Bank of America Merrill Lynch said the low oil prices were also due to a slowdown in demand."Oil demand growth this year is underwhelming, in part explaining why crude oil prices and refining margins have sold off sharply recently", it said.

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