Published: Fri, May 19, 2017
Money | By Armando Alvarado

Oil Drops On Rising US Crude Inventory, Defies Expected Supply Cut Extension

Oil Drops On Rising US Crude Inventory, Defies Expected Supply Cut Extension

Brent crude, the global oil benchmark, rose 1.1% to $53.12 a barrel on London's ICE Futures exchange.

USA crude oil inventories rose by 882,000 barrels in the week ending May 12 to 523.4 million, compared with analyst expectations for a decrease of 2.4 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.

"The agreement by OPEC to extend cuts into 2018 is critical", said AB Bernstein in a note. The API estimates are followed by official figures from the Energy Information Administration on Wednesday.

Distillate stocks gained 1.79 million barrels and gasoline supplies fell 1.78 million barrels.

At Multi Commodity Exchange, crude oil for delivery in current month was trading higher by Rs 24, or 0.75 per cent, to Rs 3,227 per barrel, in a business turnover of 3,156 lots.

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Kuwait joined Saudi Arabia and Russian Federation in supporting an extension of oil-output cuts by OPEC and other global producers through the first quarter of 2018 to help trim global stockpiles.

A second source said a deeper supply cut was an option depending on estimated growth in supply from non-OPEC and USA shale oil.

Prices have rebounded about 10 percent since hitting five-month lows 11 days ago. Individuals from the Organization of Petroleum Exporting Countries concurred in November to cut 1.2 million barrels a day of oil production.

The meeting precedes a policy-setting gathering of OPEC and non-OPEC oil ministers May 25 to decide whether to extend their deal to reduce output beyond June 30. "If you do get prices in the mid-to-upper $50s all that's going to do is encourage a lot of production in the USA", said Nauman Barakat, head of the energy desk at ADM Investor Services in NY.

The increase, OPEC said, represents the biggest increase among countries within the oil producers' group. "On the other, there are those who are focused on the real drawdowns that have started to occur in USA oil stocks over the past month or so", he said. US oil production has risen by 10% over the past year.

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