Iraq, Algeria support extension of oil production cuts

A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie Oklahoma

The Organisation of the Petroleum Exporting Countries and non-Opec member countries will meet in Vienna on May 25 to discuss whether to continue output cuts of 1.8 million bpd in an effort to reduce a global crude glut and support prices. The projection is four times higher than in November, when the group announced a production cut to try and re-balance oversupplied world markets.

Industry group American Petroleum Institute reported that crude prices also gained support by the fall in USA inventory, a 5.8 million barrel decline.

Global benchmark Brent crude was up $1.81 at $50.54 a barrel by 1:51 p.m.

Some analysts questioned the staying power of the sharp price rebound, given increased crude production in the United States, along with OPEC members Libya and Nigeria.

Oil futures rose on Wednesday after Reuters reported Saudi Arabia would cut supplies to the region as OPEC tries to counter rising USA output that is threatening to derail its attempts to end a sustained global crude glut.

But after Brent prices fell back below $50 per barrel last week, analysts said producers felt forced to act.

Further, the EIA upgraded its crude oil estimate to an average of 9.3 million barrels per day (bpd) in 2017 and 10 million bpd in 2018.

OPEC is curbing its output by about 1.2 million barrels per day (bpd) from January 1 for six months, the first reduction in eight years, to clear excess supply.

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Crude prices surged back above $47 to settle higher, as investors' jitters concerning rising levels of USA oil output eased, after the EIA revealed a bullish inventories report.

Investors are now waiting to see if those numbers are confirmed on Wednesday by official figures on weekly USA crude and oil product inventories from the US government's Department of Energy, due out at 1430 GMT. The API reported a draw of 5.789 million barrels during the week-ended May 5.

Prices surged immediately after the agreement, but have come under sustained pressure in recent weeks as US production has ramped up and pushed back the expected timing for when the oil market will come into balance.

Crude oil gains are expected to be limited, however, because of an unexpected build in gasoline inventories.

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.

"The headline crude oil drawdown number is certainly supportive, but it could be something a shooting star".

Crude futures rose on the data after enduring weeks of pressure over worries that a deal between OPEC and non-OPEC producers to reduce supply was not having the desired effect.

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