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Crude oil futures up 0.75 pc on positive global cues

Gold Daily Gold Daily
Manuel Armenta | 19 May, 2017, 22:46

OPEC and its allies can only hope that increased USA production won't jeopardize its aim of bringing down global crude stockpiles to the five-year average-putting a floor under prices and making sure they don't plummet.

US commercial crude oil inventories fell by 1.8 million barrels from the previous week, the Energy Information Administration said on Wednesday.

UBS oil analyst Giovanni Staunovo said he saw a 60 percent probability of OPEC extending output cuts.

After settling on Wednesday at their highest levels in almost a month, light, sweet crude futures for delivery in June were recently down 0.3% at $48.91 a barrel in the Globex electronic session.

Both benchmark prices started the day in negative territory after data from the American Petroleum Institute estimated that US crude stocks had risen by 882,000 barrels.

Russian Federation reduced its oil output by 300,000 barrels per day, as stipulated in the Vienna deal signed between OPEC and non-OPEC countries, Russia's Energy Minister Alexander Novak said on May 18.

The Organisation of the Petroleum Exporting Countries, Russia and other producers originally agreed to cut production by 1.8 million barrels per day for six months from Jan 1.

Though investors aren't liable to make big bets ahead of the meeting, oil could get a kick later Friday when Baker Hughes' weekly US rig-count data are released. Prices fell sharply after Reuters reported that advisers to the president's campaign past year had at least 18 undisclosed contacts with Russians. The contract is on track for a 3.5-percent climb this week, a second week of gains. JPMorgan is forecasting US shale to grow by 1.05 million barrels a day next year, while Bank of America Merrill Lynch has a figure of 950,000 barrels a day.

The cost to drill for shale has fallen by more than one-third in the last two years, analysts said. In the most recent week, US production slipped 9,000 bpd to 9.305 million bpd, the first decline in 13 weeks.

Although a small producer within OPEC, Algeria played an important role in bringing together the diverse group of the cartel's members to talk and finally reach the initial deal to collectively curb production. Data released on Thursday shows that even Saudi Arabia has increased sales in the market by 275,000 barrels a day.

Thomas Finlon, director of Energy Analytics Group LLC, added, "There's room for guarded optimism: OPEC appears to be close to an agreement to roll over the cuts, and US inventories are finally starting to decline".