Published: Sat, May 20, 2017
Markets | By Noel Gibbs

Oil turns positive as market awaits EIA data

Oil turns positive as market awaits EIA data

Brent crude settled 56 cents firmer at $52.21, a 1.1 percent gain, while US light crude closed 41 cents higher at $49.07, its highest close since April 28.

Jefferies analysts lowered their oil price forecasts due to the rise in USA production, cutting its Brent price estimate for the second half of 2017 to $59 per barrel from $61 previously.

Overnight, crude futures settled higher on Wednesday, as investors cheered the release of a bullish report from the Energy Information Administration (EIA), showing US crude inventories fell for a sixth-straight week.

The US Energy Information Administration said on Wednesday that crude inventories fell 1.8 million barrels for the week to May 12, to 520.8 million barrels.

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Brent reached US$52.63 a barrel and WTI rose as high as US$49.66 on Monday after Saudi Arabia and Russian Federation agreed on the need to extend output curbs by members of the Organization of the Petroleum Exporting Countries and other producers.

OPEC also raised its forecast for oil supply growth from non-members in 2017 but kept its outlook for global crude demand unchanged at 96.4 million bpd. Riyadh and Moscow say they should be extended until March 2018.

Having seen a almost two-week short-covering rally bring prices in WTI and Brent crude oil back about 50% of their last sell-off, it's now up to OPEC and non-OPEC members to agree to a further extension of the deal to cut production at the cartel's May 25 meeting to bring in new buyers to sustain the rally.

"The oil rally has paused and whether it can resume depends on today's EIA inventory report", said Ole Hansen, head of commodity strategy at Saxo Bank.

Higher US Crude Output Should Pressure Oil Prices
On Thursday, non-members Turkmenistan and Equatorial Guinea said they would join the cuts, though they are smaller producers. Saudi Aramco, which is a state-owned, is going to low oil supplies to Asian customers in June by 7 million barrels.

Goldman said that beyond the ongoing rise in United States oil production, which is up over 10 per cent since mid-2016 to 9.3 million bpd, output will increase by Opec members who were exempt from the cuts, or where supply disruptions had ended, including Libya and Nigeria.

"This statement shows the commitment by OPEC and major non-OPEC oil producers to bringing stability to the oil market, in which is essential to have security of supply in coming years", said one of the sources.

North Sea oil shipments to Asia have also been at record highs this year, with nearly 19 tankers registered to have been shipped in Q1, and a similar amount expected to go to Asia in the second quarter.

The EIA forecasts US production to average almost 10 million bpd by the end of 2018.

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Shipping data in Thomson Reuters Eikon shows that USA oil exports to Asia have soared from just a handful of tankers per quarter throughout 2015 and 2016, to 10 tankers in the first quarter of this year, a figure that is expected to rise in the second quarter.

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