Monday, 29 May, 2017

Oil hits five-week top on geopolitical tensions, strong demand

Crude oil Oil Prices Little Changed Ahead of Inventory Projections
Nellie Chapman | 20 April, 2017, 06:52

The IEA said oil stocks in the Organisation for Economic Cooperation and Development industrialized countries fell by 17.2 million barrels in March, although inventories were still 300 million barrels above the five-year average.

Saudi Arabia and Russian Federation are leading the agreement by the Organization of Petroleum Exporting Countries and other producers to curtail oil supplies and end a three year surplus.

But OPEC also raised its forecast for supplies from non-member countries in 2017 as higher prices encourage U.S. shale drillers to pump more, reducing demand for OPEC's oil this year.

U.S. commercial crude inventories hit a record 535.5 million barrels this month, although a report on Tuesday by the American Petroleum Institute suggested a dip.

The EIA believes that burst of oil could weigh on oil prices. Earlier in the session, Brent had climbed to its highest since March 7 at $56.16. OPEC oil producers will meet on May 25 to discuss the supply cut extension.

Including Nigeria and Libya, the two members exempt from the deal to cut supply, output by all 13 OPEC members in March fell to 31.939 million bpd, two sources said.

But OPEC revised up its estimate of oil supply growth from producers outside the group this year to 580,000 bpd, as higher oil prices following the supply cut help spur a revival in US shale drilling.

Both Brent and West Texas Intermediate oil price benchmarks declined over the course of the first quarter - to below US$52 per barrel for Brent and US$48 per barrel for WTI - but have recently rallied. Several OPEC countries, including Kuwait, have expressed public support for an extension, Bloomberg said.

OPEC and other oil producers agreed in November to cut output by 1.8M barrels per day during the first half of 2017 in order to stabilise the oil market.

Oil prices rose to five-week highs after Friday's reports of US -ordered airstrikes against Syrian infrastructure, followed by production outages from Libya's largest oilfield, and late-breaking news on Tuesday that suggested Saudi Arabia would support OPEC production cuts.

In the United States, production and inventories were surging.

That effort has pushed oil prices above $50 a barrel in recent months, breathing life into USA oil patches like the Permian Basin.

The EIA revised its forecast for US oil production up by around 2 percent for 2018, and it increased its projection for the fourth quarter of 2017 up about 1 percent.