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Published: Wed, April 19, 2017
Economy | By Melissa Porter

Commitment to Oil Supply Cuts

Commitment to Oil Supply Cuts

On Monday, shortly before the Nymex settlement, a monthly report from the Energy Information Administration forecast a rise of 124,000 barrels a day in May to 5.193 million barrels a day for crude-oil production in seven major USA shale-oil plays. Meanwhile, before the major markets closed for the holiday break on Thursday, they were higher by 3 cents at $55.89 per barrel.

The oil market has been caught in a tug-of-war between forecasts that OPEC production will remain at reduced rates and bearish reports suggesting US production is rising, preserving a supply overhang in the market.

"We're also back into a price area that may attract more shale oil production". The latest indication is that OPEC may be willing to extend its output cut beyond the six months initially planned.

Angola saw its oil output rise to 1.782 million bpd last month from 1.767 million bpd in February, based on direct communication, according to the OPEC report. Before the weekend, gas prices rose an average of 12 cents in 19 days, nationwide; and 13 cents in 14 days, in Florida.

With these mixed technical indicators, market players could turn to fundamental factors in deciding where to take crude oil next.

USA drillers last week added rigs for a 13th straight week, bringing it to its highest in roughly two years.

The Managing Director of Shell Petroleum Development Company (SPDC), Osagie Okunbor, had said the company was working to remove a significant number of oil theft connections and effect repairs on the pipeline.

Opec and other producers, including Russian Federation, agreed late in November to cut output by around 1.8mbpd in the first half of 2017 to rein in oversupply.

The West Texas Intermediate (WTI) benchmark for USA crude futures was down 26 cents, or 0.5%, at $52.92 a barrel at 10:53 a.m. ET.

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. Some traders may also be disappointed by reported comments from Saudi Arabia's Energy Minister Khalid al-Falih, who said it's too early to talk about an extension to the production-cut agreement led by OPEC, he said. For the past four weeks, according to preliminary EIA data, the USA has taken in about 12 percent less Saudi crude than the same time a year ago.

Oil prices fell on Tuesday, then slid more in post-settlement trade after an industry group reported that USA crude stockpiles fell less than expected in the latest week while gasoline stockpiles grew unseasonably.

Oil prices swelled to their highest levels since March 1.

Nobody said curing a global oil glut would be easy.

"It is of course OPEC's business to decide on its output levels, but a effect of (hypothetically) extending their output cuts beyond the six-month mark would be bigger implied stock draws", the International Energy Agency said in a report released Thursday.

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