Oil prices rise as market expects extended production cut
Oil prices rose on Wednesday, supported by increasing confidence that an OPEC-led production cut aimed at tightening the market would be extended through the rest of 2017 and the first quarter of next year.Brent crude futures LCOc1 at 0147 GMT were up 13 cents from their last close at $54.28 per barrel.U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $51.58, up 11 cents.Both benchmarks have risen more than 12 percent from their May lows.
Prices have rebounded on a growing consensus that a pledge by the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russia, to cut supplies by 1.8 million barrels per day (bpd) would be extended to March 2018, instead of just covering the first half of this year. is meeting on 25 May with an extension of supply cuts at the top of its agenda. With oil stocks nowhere near OPEC's... objective of the recent five-year average level, an extension of cuts seems all but a foregone conclusion,"
Although there have been signs of inventories dipping recently, overall stocks remain bloated following years of overproduction. BACKWARDATION HELP?One of the main reasons why markets have not tightened more has been U.S. oil production, which has soared more than 10 percent since mid-2016 to 9.3 million bpd. C-OUT-T-EIABenefitting from a market structure known as contango, in which future oil prices are higher than those for immediate delivery, U.S. drillers have sold future production in order to finance expanding output.
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