A worker for Iraqi Drilling Company at Rumaila oilfield in Basra, Iraq May 11, 2017.
The oil market outlook is always a bit complicated, in part due to the impact OPEC can have on balances.
Futures rose as much as a 1.5 percent in NY, set for the biggest weekly advance since March. A Bloomberg survey of analysts this week showed the Organization of Petroleum Exporting Countries and its allies will probably prolong their agreement for at least six months.
Kuwait, a Gulf producer usually aligned with the Saudi OPEC view, said on Tuesday it supported the proposal. "The prospect of longer cuts and a larger size are like a shiny object dangling in the sea".
July West Texas Intermediate crude oil closed at $49.66, up $0.25 or +0.51%. Futures touched $50.25, the highest since April 21. Prices increased 5.2 per cent this week. United States crude oil was 16 U.S. cents lower at US$48.91.
Brent crude settled up $1.10, or 2.1 percent, at $53.61, the highest settlement for the worldwide benchmark since April 18.
The futures contract for oil storage at the LOOP, off Louisiana's coast, dropped to about 24 cents per barrel recently, one of the lowest prices this year.
In order to achieve the target of reducing these stocks to their five-year average over an extended nine-month period of supply cuts, BMI said that inventory drawdowns would have to average 25.6 million barrels per month in the three last quarters of the year.
It isn't going to get a lot better for OPEC in 2018, either. The US, a non-OPEC member, is now dictating the direction of the market.
Most members support a proposal by Saudi Arabia and Russian Federation to extend supply cuts for nine months, Algerian energy minister Noureddine Boutarfa said Thursday.
Several OPEC countries have spoken out in recent weeks in favour of extending the cuts.
The cartel is billed to meet in Vienna later this month, to discuss possible extension of output cut.
"Capped Opec/Russian production with stronger seasonal demand during summer sets the stage for oil prices to reach US$60 a barrel over the coming months".
The global market for crude oil is welcoming more oil in the form of exports from USA offshore basins in the Gulf of Mexico. Expectations are that the meeting will yield a consensus agreement on an extension of the cuts, but this is the first time a potential deepening is also being mentioned.
The US oil production stood at 9,305 thousand barrels per day (kbpd) last week, which is almost 7% higher compared to where it was in November 2016, when the OPEC deal was announced.