Oil prices climb on hopes output cuts will be extended

OPEC also raised its forecast for oil supply growth from non-members in 2017 but kept its outlook for global crude demand unchanged at 96.4 million bpd. On Wednesday, oil prices were boosted by the EIA reporting a fresh draw in crude oil inventories for the week to May 12, at 1.8 million barrels.

In recent years Saudi Arabia, concerned with the increase in US shale gas production, increased its oil output to drive down prices in a bid to make shale gas exploration economically unattractive.

But market watchers are growing more confident that OPEC, Russia and other big producers will extend cuts of nearly 1.8 million barrels per day (bpd) until the end of March 2018.

As per the UBS oil analyst Giovanni Staunovo, there is 60% probability of OPEC extending output cuts and this should help tighten the oil market.

Oil - US Crude: As of May 8, retail trader data shows 68.0% of traders are net-long with the ratio of traders long to short at 2.13 to 1.

"If you look at what's happened since the beginning of the year, [the market has] tried to trade the OPEC production cuts, the big draws in the USA inventories, and it got stung once in April and again in May", he said. Concurrently, the West Texas Intermediate (WTI) was seen inching closer to $50, coming in at $49.45 per barrel, up 38 cents or 0.77%.

For full coverage of all proceedings in Vienna at OPEC's 172 meeting - log into www.opec.org for live webcast from 0900 Central European Time on Thursday 25 May 2017.

"The numbers beneath the surface were rather mixed with gasoline stocks falling only slightly on weaker demand and sharply higher imports suggesting sufficient availability of crude oil internationally despite OPEC cuts", said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany, as reported by Reuters.

Brent crude was up 65 cents at $53.16 at 11:38am GMT, after climbing to $53.20, its highest since 21 April. The decline was mostly due to countries outside of OPEC, such as Canada. Oman, a non-OPEC producer like Russian Federation, extended its support the very day for controls to proceed till March.

Supply cuts of 1.8 million barrels per day (bpd) were initially agreed to run during the first half of 2017.

In the Amsterdam-Rotterdam-Antwerp (ARA) region - one of the most expensive areas in Europe to store oil and the benchmark pricing point for fuel - crude is starting to flow back into storage because refiners are "clogged" with oil, an industry source handling deals in that region told Reuters.

US companies that rely on expensive drilling methods have become more efficient, frustrating OPEC's two-year effort to end a crude glut by pumping at maximum capacity to wash out high-cost producers.

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