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

Oil extends gains as USA crude stocks fall for 5th straight week


Saudi Arabia, the world's biggest oil exporter, has notified several Asian refiners of its first cuts in crude allocations for regional buyers since OPEC's output reduction took effect in January.

LONDON, May 10 (Reuters) - Oil prices rose on Wednesday after a larger-than-expected fall in USA crude inventories but failed to recoup last week's losses due to concerns about rising output from the United States, Libya and Nigeria.

Saudi Arabia's energy minister, Khalid al-Falih, said on Monday he expected Opec to agree to extend an agreement to limit oil production to the end of the year or possibly longer.

In the report, OPEC pointed to continued high compliance by its members with the supply deal and said oil stocks in industrialized nations fell in March - although they are still 276 million barrels above the five-year average.

Oil prices have gained support but global inventories remain high, pulling crude LCOc1 back below $50 a barrel and putting pressure on OPEC to extend the cuts through the rest of 2017.

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.

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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.

"We need to see the OPEC/non-OPEC deal extended to 2018, otherwise there's a risk oil prices will fall below US$40", Alexandre Andlauer, an analyst at AlphaValue SAS in Paris, said by email.

The Opec deal reached in November helped lift prices but also breathed new life into USA producers, who have boosted drilling in shale regions and raised United States output to levels not seen since mid-2015.

An OPEC source said other ideas and scenarios could be discussed, adding that core Gulf OPEC producers had talked about an extension beyond six months. Goldman Sachs' head of commodities Jeff Currie said this week the market is already in a supply deficit.

Oil cartel OPEC are due to meet later this month, which could see an agreement to sustain oil cuts to help raise falling prices.

The rebound in oil prices to around $50 in recent months breathed new life into US producers, who have boosted drilling in shale regions, lifting USA output to levels not seen since mid-2015.

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