Opec cut extension to ease glut by year-end: Algeria

As ministers gathered in Vienna for informal consultations, Saudi OPEC ally Kuwait said discussions included the possibility of deepening the cuts or prolonging them by 12 months. Equatorial Guinea has been accepted as a new member of the Organization of the Petroleum Exporting Countries (OPEC), according to the Minister of Energy, Industry and Mineral Resources of Saudi Arabia Khalid Al-Falih.

Boutarfa said extending output cuts by nine months would help to ease a global glut by the end of 2017, when inventories should decline to their five-year average: "Before the end of the year, prices may go above $55 a barrel".

Azerbaijan, whose participation in joint oil production cuts is defined at 35,000 barrels per day, also supports prolongation.

But any uptick in prices may be modest and temporary.

But the price rise has spurred growth in the US shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global stocks still near record highs.

"Over a five-plus-year horizon, oil price growth is in a structural slowdown, pressured by persistent supply gains", BMI Research said. As Middle East nations including Saudi Arabia bear the majority of the mandated output curbs, the regional benchmark Dubai crude has strengthened versus U.S. West Texas Intermediate, making oil linked to WTI attractive to buyers.

"Impact locally would likely prove more important than on the global market, given the sharp ramp up in USA drilling and the steady production growth we expect will require new infrastructure capacity, from moving oil to the coasts to increasing exports", Goldman analyst Damien Courvalin wrote in the report.

The Persian Gulf country boosted output and exports after worldwide sanctions were eased in January 2016, but its production capacity is stuck at about 3.8 million barrels a day, he said.

Non-Opec members, led by Russian Federation, have also agreed to another nine-month production cut.

Oil prices have risen less than OPEC hoped for from last year's levels.

"Assuming the group is able to do this, inventories should fall "'noticeably" and continue to support an "upward path for oil prices", it said.

OPEC has for weeks been laying the groundwork to extend production cuts.

Commerzbank cited data from the U.S. Department of Energy saying U.S. production was roughly 540,000 barrels per day higher in mid-May than at the start of the year.

The price rise this year has spurred growth in the United States shale industry, which is not participating in the output deal, thus slowing the market's rebalancing with global crude stocks still near record highs.

"We have to wait and see that the militancy effects are out and the infrastructure is rebuilt and we're back to production", he said.

More than 400 oil rigs are now working US shale fields - an increase of more than 120 percent compared with a year ago.

The oil price is likely to remain volatile through Thursday, with non-OPEC producers, including Russian Federation, slated to meet with the cartel to decide on their own output levels later in the day. Still, prices are around half the levels reached in 2014.