Published: Thu, May 18, 2017
Global News | By Stacy Ballard

Oil prices dip as supply remains ample despite output cuts

USA commercial crude inventories decreased by 1.8 million barrels last week, maintaining a total US commercial crude inventory of 520.8 million barrels.

The statement after an agreement by Saudi Arabia and Russian Federation - the largest non-Opec producer taking part in production cuts in the first half of 2017 - to extend the agreement by nine months.

The US EIA Crude Oil Inventories data (for the week ending May 12) will be released at 15:30 BST this afternoon with a consensus of -2.360M.

According to OPEC's latest Monthly Oil Market Report for May, Nigeria's output was put at 1.484 million bpd for April, from 1.21 million bpd in March, which was based on direct communication.

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On Thursday, the prices of oil fell as the market stayed well supplied with crude, despite of all the efforts by OPEC and other big exporters to cut down production and support prices. The latest official data on U.S. demand for February revealed the biggest decline in nearly four years at 495,000 bpd, according to the agency. The EIA still expects USA production to average 9.31 million bpd in 2017.Crude stocks have been edging lower after hitting a record 535.5 million barrels at the end of March.

Meanwhile, four of the 11 non-OPEC nations that joined supply cuts - Russia, Azerbaijan, Oman and South Sudan - have said they would also support extending the curbs.

Following the event, West Texas Intermediate crude price increased to $49.66 per barrel, nearly touching the $50 per barrel physiological mark.

Last Wednesday's EIA crude oil inventory data saw a drop of 5.247 million barrels hitting the lowest level this year, in turn, pushing oil prices higher.

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But the International Energy Agency said Tuesday that just extending the cuts wouldn't be enough to bring markets in balance.

"We think the rebalancing is here and the rebalancing will continue", Neil Atkinson, head of the oil industry and markets division at the IEA, told CNBC on Tuesday.

Brent crude was up 83 cents, or 1.6% at $52.48 USA per barrel mid-morning Wednesday.

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The 1.8 million barrels a day cut has yet to make a notable dent in global supplies. Steadily rising output has been key in damping expectations that the OPEC-led output cuts would successfully boost prices. "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".

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