Oil climbs after reports that Saudi Arabia wants output cuts extended

The report said crude oil inventories fell by 2.17 million barrels in the week ended April 7th compared to economist estimates for an uptick of 87,000 barrels.

The Energy Information Administration's report also sent oil prices lower on Wednesday, breaking a six-day winning streak spurred by expectations major oil producers will agree to extend their output cuts into the second half of the year.

US West Texas Intermediate (WTI) crude futures were up 18 cents, or 0.34 per cent, at $53.58 a barrel, also their highest since early March.

Market analysts' had expected a crude-stock build of 0.087 million barrels, while the American Petroleum Institute late Tuesday reported a 1.33 million barrels decline in stockpiles.

Saudi Arabia, de-facto leader of the Organization of the Petroleum Exporting Countries, has told other producers that it wants to extend a coordinated production cut beyond the first half of the year, the Wall Street Journal reported.

Brent crude futures LCOc1, the worldwide benchmark for oil, were at $56.40 per barrel at 0117 GMT, up 17 cents, or 0.3 percent, from their last close, their highest since early March.

OPEC cut oil output in March by more than pledged under a supply reduction deal and said oil inventories had fallen in February, suggesting that its effort to clear a supply glut that has weighed on world oil prices is succeeding. If OPEC and its non-OPEC supporters could not act in concert and meet their commitments to cut output supporting higher oil prices, then there would be little hope the cartel would ever be effective.

OPEC upgraded its 2017 global demand growth forecast to 1.27 million barrels per day, an upwards revision of 10,000 barrels per day as thirst from Asia rises.

The market, which retreated early in US trading, turned positive after reports that Saudi Arabia said it wants to extend production cuts enacted in January for another six months when the group meets in May, according to the Wall Street Journal. However, oil prices managed to continue trading above $55. Sources from the Kingdom yesterday said that Riyadh is ready to discuss an extension to the agreement into the second half of the year, strengthening the oil price rally that began last week, after the USA airstrikes against Syrian army targets.

"U.S. production rose 36,000 barrels per day, the most since January 2016 and the Baker Hughes rig count of 672 is the highest since August 2015".

Last month, Libya's output dropped by almost 9 percent, and production edged lower in the United Arab Emirates, Venezuela, Nigeria, Iran, Angola and other countries. The monitoring committee, led by Kuwait, which consists of both OPEC and non-OPEC members said last month it has been satisfied with the compliance levels.

  • Wendy Palmer