US oil output back near records, challenging Opec

The meeting precedes a policy-setting gathering of OPEC and non-OPEC oil ministers on May 25 to decide whether to extend beyond June 30 their deal to reduce output.

Since the beginning of March, crude prices have swung from over $56 a barrel to under $47 as market participants were divided over the impact of rising output from the United States versus production cuts by the Organization of Petroleum Exporting Countries (OPEC) and other oil producers, including Russian Federation.

The main point of discussion being whether to roll over the current production cut agreement.

"The question is whether that 1.8 million barrel cut is enough to cut that overhang".

Recent data from the U.S. Energy Information Administration showed that nationwide stocks started draining in April this year - the first decrease for that month since 1999.

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%.

OPEC and other producers made a decision to reduce oil supplies by 1.8 million barrels per day for the first half of this year.

There has been a fall in oil prices with crude market remaining oversupplied, OPEC's supply cut efforts.

That price spread - a market structure known as contango - allowed traders to profit even after they paid for expensive storage in facilities such as the Louisiana Offshore Oil Port (LOOP) - the only deep-water USA oil port and a major conduit for crude imports - or supertankers parked offshore in Singapore. With U.S. shale oil production surging, inventories remain stubbornly high and prices appear stuck in the low-$50s per-barrel range. Accounting for that means OPEC would need to revisit and whittle down, if necessary, the participating countries' quotas through the duration of the extension.

"Today's meeting is just informative", an OPEC source said.

Overall the IEA's global demand outlook has been revised down only by a marginal 45,000 barrels per day (bpd) compared to last month's report and is now seen at 1.3 million bpd.

But the USA crude drawdown was smaller than expected and the oil market remained extremely well supplied, analysts said.

The significant increase in USA production and supplies to northern Asia has largely offset OPEC-led deal to rebalance the market.

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