Oil rises as OPEC cuts outweigh United States drilling boom

Is USO Underperforming Crude Oil

As a result, Capital Economics is sticking with its end-2017 forecasts of 60 per barrel for Brent and 58 per barrel for Western Texas Intermediate (WTI), although, the company cautions that prices are likely to be especially volatile over the next few months. A ministry spokeswoman, however, said one option being discussed by Russian Federation was extending the cuts beyond the end of the year.

Saudi Arabia's energy minister Khalid Al-Falih said on Monday oil markets were rebalancing after years of oversupply, but that he still expected the OPEC-led deal to cut output during the first half of the year to be extended.

USA oil production and stockpile data, at the same time, has kept investors from extending bets that OPEC production cuts will be significant enough to elevate prices in the medium term.

"I do believe that the worst is clearly behind us with multiple leading indicators showing that supply and demand balances are clearly in deficit and the market is moving towards rebalancing". At least part of the strength in United States commercial crude stocks is the result of the USA government selling oil from its Strategic Petroleum Reserves, ' said the analysis. "Drilling activity in the USA continued to pick up last week, with the rig count climbing for the 16th straight to week to 703", ANZ said.




Oil capped a third weekly loss last week after dropping to levels last seen before the Organization of Petroleum Exporting Countries agreed in November to reduce production.

Most oil traders had already concluded that OPEC had no option but to extend the production cuts so the clearer language from Falih and other ministers is unlikely to shift expectations. Oil has surrendered most of its gains since their deal late previous year.

From a bullish perspective, Falih confirmed Saudi Arabia and other oil producers are prepared to do "whatever it takes" to bring global crude inventories back to the five-year average. Ministers will meet again in Vienna on 25 May to make the final decision on any extension. "OPEC members have no choice but to talk up prices by signaling an extension to the production cuts agreement".

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