Hope seems to be rising for Nigeria and other oil producers as oil prices rose more than 3 percent on Wednesday, bolstered by the biggest one-week drop in U.S. inventories so far in 2017.
The development came after Iraq and Algeria joined Saudi Arabia in supporting an extension of OPEC supply cuts.
Iraq, OPEC’s second-largest producer, committed to reducing daily production by 210,000 barrels to 4.351 million barrels as part of a December agreement among major oil producers. That agreement stipulated a total reduction of 1.8 million barrels per day in the first six months of 2017.
According to the U.S. Energy Information Administration, crude inventories fell 5.2 million barrels last week, much more than the 1.8 million-barrel drop analysts had predicted.
Gasoline and distillate stocks also fell, supporting a market that has sold off in recent weeks due to persistently high U.S. inventories.
Production rose, however, and gasoline demand over the last four weeks was 2.5 percent lower than at the same time period a year ago.
Global benchmark Brent crude, according to Reuters news agency, settled up $1.49 a barrel, or 3 percent, to $50.22 a barrel.
U.S. light crude oil, on the other hand, ended up $1.45 higher at $47.33 a barrel.
“U.S. crude oil production is now solidly above 9.3 million barrels per day with more to come, and refined product, especially for gasoline, is oddly weak,” John Kilduff, a partner at hedge fund Again Capital in New York, told Reuters.
“It is difficult to see how the day’s gains last.”
Global oil prices surged after the Organization of the Petroleum Exporting Countries, OPEC, agreed in November with some other producing countries to curb supply.
But prices, however, slumped in recent weeks due to rising U.S. production, which undermined the OPEC-led efforts to reduce a global crude glut.
On Monday, Saudi Arabia’s oil minister Khalid al-Falih said he expected the output deal to be extended to the end of the year or possibly longer.
Nigeria, which along with Libya is exempt from OPEC cuts, is also expected to see a jump in output soon.
The oil producers will meet on May 25 in Vienna to discuss the possibility of extension.
Nigeria’s Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had earlier hinted that he expected an extension of the cut.
“I expect we (Nigeria) will get OPEC exemption but one year from now will it be renewed? I am not too sure,” he said.
Meanwhile, OPEC said Thursday that oil producers needed to make more joint efforts to match supply and demand in the oil market in the face of rising output in the United States.
Ahead of a May 25 meeting of the cartel where its members and Russia are expected to roll over an agreement to cut production, OPEC said in its monthly market report that common policies were needed for market stability.
While decreased stocks and an improving global economy were supporting oil demand, “continued rebalancing in the oil market by year-end will require the collective efforts of all oil producers to increase market stability,” OPEC said.
Global oil prices recently dipped briefly under $50 dollars per barrel for the first time since OPEC and Russia scaled back output as concerns whether the deal would be renewed and the impact of rising output in the United States weighed on the market.
OPEC members agreed in November to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices.
Non-cartel producers led by Russia partially matched the cuts.
Oil prices have recovered somewhat this week as OPEC and Russian officials have signaled a renewal of the production deal is likely.
But the OPEC report confirmed the cartel’s concern about a recovery in US oil output.
The cartel abandoned its traditional strategy of limiting supply to support prices between 2014 and 2016, stepping up production and causing a plunge in prices to under $30 per barrel as they sought to squeeze out higher cost US shale producers.
While US output fell last year, OPEC sees it recovering and expanding further in 2017.
Overall, the cartel expects non-OPEC supply to increase by 0.95 million barrels per day, with the United States alone likely to contribute 0.82 million barrels per day.topics from