12 May, 2017
Weekly U.S. data on crude production and inventories, plus monthly reports on supply and demand from OPEC and the U.S. Energy Information Administration this week, should provide a detailed picture of how quickly global crude inventories are falling.
For the week ended May 3, the EIA said that crude oil inventories fell by 5.25 million barrels, which confounded expectations of a draw of 1.79 million barrels.
While prices surged immediately after the agreement, in recent weeks they have come under sustained pressure as U.S. production has ramped up.
The drop was evidence to some that demand is robust in the U.S. Others took it as proof that the move by OPEC and other big oil produces to cut global crude supply is working.
Global benchmark Brent crude was up $1.81 at $50.54 a barrel by 1:51 p.m.
Any more supply from OPEC or non-OPEC could return the market to surplus. United States light crude oil ended up US$1.45 higher at US$47.33 a barrel.
In recent days major producers have voiced support for extending last year's deal from the Organization of the Petroleum Exporting Countries and other producers to cut supply.
An expectation of a balancing market from OPEC and decent economic expectations from Europe helped drive a rally in crude oil prices Thursday.
In the research note entitled Oil Nearing Capitulation, Goldman Sachs said there was "growing evidence of the ability of U.S. shale to respond near $50 per barrel and the availability of capital to support such activity", according to MarketWatch.
On the physical markets, barrels of North Sea crude changed hands at their lowest levels since late 2015 on Monday.
The cartel raised its estimate of total oil supply growth from non-OPEC producers this year to 950,000 bpd from a previous forecast of 580,000 bpd.
But questions remain about the effectiveness of OPEC-led cuts, with OPEC member Libya saying production now exceeded 800,000 barrels per day (bpd) for the first time since 2014 and could rise to 1.2 million bpd later this year.
The general expectation is that members of Organization of the Petroleum Exporting Countries, as well as some non-OPEC producers including Russian Federation, will extend the current output cuts into the second half of this year, or longer.
And while he conceded that the market should make some gains despite market turbulence in the run up to May 25, "the uptrend in Brent prices should be slow and it is highly unlikely that the $54-$55/b range will be breached".
