Oil Prices Up as U.S. Crude Supplies Decline

Posted May 20, 2017

At 522.5 million barrels, crude inventories are at their lowest since February.

The announcement will likely boost to oil prices, which yesterday jumped on reports from the American Petroleum Institute and the Energy Information Administration, which both estimated US crude oil inventories to have fallen by more than 5 million barrels in the week to May 5.

Nigeria, which along with Libya is exempt from OPEC cuts, is also expected to see a jump in output soon as Shell tests the Trans Forcados oil export pipeline before it restarts.

Gasoline and distillate stocks also fell, supporting a market that has sold off in recent weeks due to persistently high us inventories.

OPEC is curbing its output by about 1.2 million barrels per day (bpd) from January 1 for six months, the first reduction in eight years, to clear excess supply. US crude was up 1.3% to $47.93.

The producer group and other major suppliers including Russian Federation agreed past year to cut their collective production by about 1.8 million barrels a day for the first half of 2017 in an effort to reduce bloated global stockpiles and re-balance the market.

While prices surged immediately after the agreement, in recent weeks they have come under sustained pressure as US production has ramped up.

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.

Global benchmark Brent crude LCOc1 settled up $1.49 a barrel, or 3 percent, to $50.22 a barrel.

In its monthly oil market report (MOMR), OPEC said the U.S. oil and gas companies have already stepped up activities in 2017 as they start to increase their spending amid a recovery in oil prices.

Elsewhere, investors continued to monitor comments from energy ministers, after Saudi oil chief Khalid Al-Falih said Monday, that he was "confident the agreement will be extended into the second half of year and possibly beyond".

Speaking at the Platts Crude Oil Summit in London on Wednesday, Neil Atkinson, head of oil analysis at the International Energy Agency, said the current agreement by more than 20 major oil producers has succeeded in making a dent in the global supply glut that has kept prices under pressure in recent years.