Oil prices rise on prospect that Saudi Arabia seeking output cut extension

Oil futures turned negative on Wednesday, pulling back after eight straight sessions of gains after USA crude inventory data suggested that the market was still heavily supplied.

The government’s Energy Information Administration (EIA) said on Tuesday that USA 2018 crude output would rise to 9.9-million barrels per day, from 9.22-million barrels per day in 2017.

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.

This week’s draw in crude oil inventories is only the sixth draw in the last 15 weeks, using API data, with the API still reporting an overall hefty build over the previous 15 weeks of roughly 37.9 million barrels.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers have pledged to cut output by 1.8 million barrels per day in the first six months of 2017, to get rid of excess supply.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for June delivery turned lower and traded up 14 cents, or 0.25%, to $56.01 by 10:41AM ET (14:41GMT), compared to $56.25 before the release.

But OPEC revised up its estimate of oil supply growth from producers outside the group this year to 580,000 bpd, as higher oil prices following the supply cut help spur a revival in USA shale drilling.

Analysts said, however, that there are worries demand growth could falter, and other indicators were warning that the market had not yet cleared enough of its surplus to keep prices rising.

“The forecast for non-OPEC supply in 2017 will also depend on how much USA tight oil production improves in the coming months”, OPEC said in its April Bulletin.

The gain in oil prices comes despite rising USA shale oil production. Parties to the deal meet to consider the terms next month and it’s widely expected the arrangement will be extended for another six months.

While speculation that the Organization of Petroleum Exporting Countries and its allies will extend their six-month pact aimed at eroding a global glut is helping boost prices, there’s also concern that rising United States output will counter the reductions. 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.

The group is now betting on a strong USA “driving season” to drain the remaining glut of oil supplies. Russian Federation pledged to cut production by 300,000 barrels daily.

The Energy Department believes another burst of shale drilling could push US oil production close to an all-time record by the end of next year.