Published: Sun, May 14, 2017
Money | By Armando Alvarado

Oil Edges Higher As OPEC Reaches Consensus On Cut Extension

"U.S. oil and gas companies have already stepped up activities in 2017 as they start to increase their spending amid a recovery in oil prices", OPEC's Vienna-based research department said in the report.

Crude inventories in the USA fell 5.2 million barrels in the week through May 5, the Energy Information Administration reported.

According to the U.S. Energy Information Administration, crude inventories fell 5.2 million barrels last week, much more than the 1.8 million-barrel drop analysts had predicted.

Between April 3 and May 4, Brent crude oil front-month futures prices declined by 4.74 per barrel to settle at 48.38 per barrel, and West Texas Intermediate (WTI) front-month futures prices declined by 4.72 per barrel to settle at 45.52 per barrel, according to the EIA estimates.

In an overnight trade, crude futures also climbed sharply during the session on Wednesday as investors were enthusiast with the latest report from the Energy Information Administration (EIA), which revealed USA crude inventories declined more than expected.

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.

Meanwhile, crude prices bounced back above $47 and continued to surge as investors' sentiment on the rising levels of US oil output softened after the EIA reported a bullish inventory data. At 522.5 million barrels, crude stocks were the lowest since February. The initial agreement envisaged OPEC taking off 1.2 million bpd from global supply with Russian Federation and 10 other non-members cutting another 600,000 bpd.

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But after Brent prices fell back below $50 a barrel last week, analysts said producers felt forced to act.

The Organisation of the Petroleum Exporting Countries and other producers including Russian Federation have agreed to cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year to try to reduce a global fuel glut.

In recent days major producers have voiced support for extending last year's deal from the Organization of the Petroleum Exporting Countries and other producers to cut supply.

OPEC is set to give further talks on May 25, concerning of whether to extend the settlement to cut production output for an additional six-months before the year ends.

The organisation also revised its growth estimate for oil output outside OPEC to 950,000 bpd from 580,000 previously, primarily due to the impact of higher USA production.

While traders remain mostly pessimistic about oil prices, some are arguing the market is well on its way toward balance.

OPEC boosted estimates for growth in rival supplies by 64 percent as the US oil industry's recovery accelerates, threatening the group's attempts to clear a surplus.

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