Oil prices rise in expectation of Aramco supply cut to Asia

A soldier patrols in front of the headquarters of the Organization of the Petroleum Exporting Countries in Vienna Austria

A soldier patrols in front of the headquarters of the Organization of the Petroleum Exporting Countries in Vienna Austria

Production fell in the UAE, Libya, Iraq and Iran, but rose in Saudi Arabia and Angola, with Saudi Arabia's output up almost 50,000 barrels a day.

Saudi Arabia's oil minister Khalid al-Falih said on Monday that he expected the output deal to be extended to the end of the year or possibly longer.

Oil prices have gained support but global inventories remain high, pulling crude LCOc1 back below $50 a barrel and putting pressure on OPEC to extend the cuts through the rest of 2017.

The bullish inventories report, came a day after crude prices dropped 1%, after EIA raised its near-term outlook for USA oil production and revised down its projections for oil prices.

Investors are now waiting to see if those numbers are confirmed on Wednesday by official figures on weekly US crude and oil product inventories from the USA government's Department of Energy, due out at 1430 GMT.

Japan, the world's fourth biggest importer, consumes 7 million barrels roughly two days and Aramco had been keeping supplies to its major Asian customers previously.

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.

A statement by Saudi energy minister on extension of oil cut agreement will be good news Nigeria, PREMIUM TIMES can report.

Brent crude was up 40 cents at $49.50 a barrel by 0930 GMT. USA crude output has grown by over 10% since mid-2016 but didn't let oil prices to surge.

Both investors and analysts are doubtful about the effects of the deal extension, with some suggesting it would have to be extended beyond the end of 2017 and others arguing that cuts won't do the trick because it is missing the point: USA producers are boosting their drilling efficiency and lowering production costs, which results in sustainable profitability. Since a low point in May 2016, United States producers have added 387 oil rigs, or about 123 percent, Goldman Sachs said.

A third source said an extension of up to one year could be an option.

The Organisation of Petroleum Exporting Countries (OPEC) has called on U.S. shale oil drillers to cut output for the prosperity of global economy.

Still, the notification of cuts in June allocations signals added urgency among Opec members as evidence mounts that the output reduction has so far failed to rein in a global crude glut in crude.

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