Published: Sat, May 20, 2017
Money | By Armando Alvarado

Oil spikes as USA inventories tumble by more than expected

Higher crude output from the United States should limit any upside to global oil prices through the end of 2018, the USA government said on Tuesday, ahead of a meeting of major oil producers later this month to discuss extending supply cuts. As per the article published on Bloomberg, U.S. crude built has also been retreating for the past four weeks from record levels seen at the end of March.

In the report, OPEC pointed to continued high compliance by its members with the supply cut deal and said oil stocks in industrialised nations fell in March - although they are still 276 million barrels above the five-year average. Aramco had previously maintained supplies to important Asian customers.

Oil prices had some spring in their step midday Wednesday after USA government data confirmed a larger-than-expected fall in US crude inventories as refineries cut output.

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

Brent was 70 cents higher at $50.92 a barrel by 0945 GMT. "U.S. tight crude output is expected to rise rapidly and increase by 600,000 bpd in 2017", OPEC said, using another term for shale. "Oil may have seen the worst of the selloff for now, as the market turns its attention to the OPEC meeting at the end of the month", said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.

Crude prices were modestly higher during the course of the session on Thursday in Asian trading, building an overnight gains, following a much better-than-expected reports on USA inventories.

A third source said an extension of up to one year could be an option.

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The slide had worsened after OPEC delegates downplayed the chance that their group and other producing countries would deepen their output cuts when they meet on May 25.

Iraq - OPEC's second-largest producer and a country that relies on oil revenues for almost 95 percent of its budget - committed to reduce daily production by 210,000 barrels to 4.351 million.

Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels in June.

Non-cartel producers led by Russian Federation partially matched the cuts.

The cartel raised its estimate of total oil supply growth from non-OPEC producers this year to 950,000 bpd from a previous forecast of 580,000 bpd.

"I am still watching the USA summer gasoline demand", said Kho, the president of Vitol Asia Pte.

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