Stockpiles Lurch Backward, Oil Prices Leap

Stockpiles Lurch Backward, Oil Prices Leap

Stockpiles Lurch Backward, Oil Prices Leap

Russian Federation and Saudi Arabia said on Monday that they're in favor of extending output cuts for nine months to give global stockpiles more time to reach the level targeted by OPEC and its allies.

The last time the market fell to this level was before the end-November OPEC meeting, where it was agreed that oil producers would cut output for the first time in eight years.

In a joint statement the two countries said an extension to March 31, 2018 was needed "to ensure market stability, predictability and sustainable development".

West Texas Intermediate for June delivery increased 58 cents, or 1.2%, to $49.24/bbl at 12:13 p.m. on the New York Mercantile Exchange.

U.S. oil stocks fell by 1.75 million barrels last week - the sixth consecutive weekly decline - as refiners ramped up their purchases of crude, according to the U.S. Energy Information Administration. However, the report warned even if supply cuts are extended at OPEC's May 25 meeting, "much work remains to be done in the second half of 2017" in order to drain stocks closer to its benchmark five-year average. The recent drop in long-dated WTI crude prices will act to curb growth in the United States oil rig count.

At least three vessels capable of moving 1 million barrels of crude each are sending domestic oil to Asian refiners, as well as some Mexican crude, several sources said.

"Early May spot prices showed both Brent and Dubai trading at around a $3 per barrel premium to Brent and WTI Cushing, which is an open window", said Fielden.

Official data on USA crude stocks will be released later by Energy Information Administration.

In the report, the oil producers' group noted that, "Crude oil production declined in the UAE, Libya, Iraq and Iran, but increased in Angola and Saudi Arabia".

Statements from Opec governments and media reports have backed up expectations of a widespread oil production cut led by the world's largest crude exporter Saudi Arabia. "The overall outlook for the non-OPEC countries, 11 of which are voluntarily cutting production to support OPEC, shows growth in 2017 of almost 600,000 b/d, an increase on the 490,000 b/d seen in last month's report". It was down 5.1% from its 14-year high settle of 103.21 on January 3, which was in large part attributed to expectations of strong U.S. economic growth from the Trump administration's pro-business policies.

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