SINGAPORE, May 11 Oil prices rose on Thursday, and Brent was firmly back over $50 per barrel, as a fall in US crude inventories and a more severe than expected cut in Saudi supplies to Asia tightened the market.
In an overnight trade, crude futures also climbed sharply during the session on Wednesday as investors were enthusiast with the latest report from the Energy Information Administration (EIA), which revealed USA crude inventories declined more than expected.
The news agency reported that state-owned Saudi Aramco will reduce oil supplies to its Asian customers by almost seven million barrels next month as it is likely to witness a surge in domestic power demand over summer.
USA crude imports USOICI=ECI fell last week by 799,000 barrels per day, the biggest weekly drop since mid February, to just 6.9 million bpd, the first time they have been below 7 million bpd since early March.
Brent climbed 1.2% to $50.84 per barrel. Consequently, we have raised our view to neutral from bearish and closed our short position. The projection is four times higher than in November, when the group announced a production cut to try and re-balance oversupplied world markets.
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Higher crude output from the United States should limit any upside to global oil prices through the end of 2018, the U.S. government said on Tuesday, ahead of a meeting of major oil producers later this month to discuss extending supply cuts.
Signs that oil-producing Iraq and Algeria were joining Saudi Arabia backing an extension to supply cuts also supported the price.
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The oil ministers of the two countries held a press conference in Baghdad where Iraqi Oil Minister Jabar Ali al-Luaibi said "there might be new ideas to be presented" at an OPEC meeting on May 25, without providing further details.
U.S. West Texas Intermediate (WTI) crude CLc1 was up 23 cents, or 0.5 percent, at $46.11 a barrel.
While US oil inventories fell, the country's crude oil production continued to rise, jumping above 9.3 million bpd last week, in what is now a more than 10 per cent increase since its mid-2016 trough. While it noted that surplus oil held at sea diminished, stockpiles in the most industrialized nations increased from the fourth quarter by 31 million barrels to just over 3 billion.
Consequently, the EIA has revised the Brent and WTI prices down for 2017, to $52.6 and $50.68 per barrel respectively.
Also supporting prices were comments from Algeria's energy minister that Algeria and Iraq favor extending global supply cuts when OPEC meets this month.
USA light crude oil was up 75 cents at $48.08.
"The headline crude oil drawdown number is certainly supportive, but it could be something a shooting star".
"That is exactly what we got yesterday as the report showed falling stocks of oil and fuel combined with lower imports", he said.