Oil Rises on Renewed OPEC Hopes

Posted by Joseph Keefe

OPEC, others have already promised to cut 1.8 million
bpd in H1.

Oil prices rose on Thursday after OPEC sources said the group
could extend its oil supply-reduction pact with non-members and
might even apply deeper cuts if global crude inventories failed
to drop to a targeted level.

OPEC and other exporters including Russia agreed last year to cut
output by 1.8 million barrels per day (bpd) to reduce a
price-sapping glut. The deal took effect on Jan. 1 and lasts six

Most OPEC members appear to be sticking to the deal so far but it
is unclear how much impact the supply reductions are having on
world oil inventories that are close to record highs.

The supply pact could be extended by May if all major producers
showed "effective cooperation", Reuters on Thursday quoted an
OPEC source as saying.

"There's a good chance and high odds that the group (OPEC)
decides that they want to continue this process," Energy Aspects
analyst Richard Mallinson said.

Benchmark Brent crude was up 40 cents at $56.15 a barrel by 1215
GMT. U.S. light crude gained 30 cents to $53.41 a barrel.

Global inventories are bloated and supplies high, especially in
the United States.

U.S. crude and gasoline inventories soared to record levels last
week as refineries cut output and gasoline demand softened, the
Energy Information Administration said on Wednesday.

Crude inventories jumped 9.5 million barrels in the week to Feb.
10, nearly three times more than forecasts, boosting commercial
stocks to a record 518 million barrels.

Gasoline stocks rose by 2.8 million barrels to a record 259
million barrels.

U.S. crude production, meanwhile , has risen
6.5 percent since mid-2016 to 8.98 million bpd.

Analysts say the oil market is balanced between these twin
pressures: OPEC cuts and rising U.S. inventories and production.

Brent and U.S. crude futures have traded within a $5 per barrel
range since the start of the year.

"Prices have not seen this kind of stability for several years,"
said David Wech, managing director of Vienna-based consultancy
JBC Energy.

"However, if crude prices are to break out of their recent range
in the next few weeks, the risk is to the downside."

Gavin Wendt, founding director and senior resource analyst at
commodity research firm MineLife, agreed:

"The world oil market is very much in wait-and-see mode, which is
why the price has remained in the mid-$50s per barrel range since

By Christopher Johnson and Henning Gloystein

Feb 16, 2017

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