Global oil benchmark, Brent crude, recouped some of the losses it recorded in recent days on Wednesday and traded above the $50 per barrel mark.
Oil prices were bolstered by the biggest one-week drop in the United States’ inventories so far this year, and after Iraq and Algeria joined Saudi Arabia in supporting an extension to supply cuts by the Organisation of Petroleum Exporting Countries.
Brent, against which half of the world’s oil is priced, rose by $1.53 to $50.26 per barrel as of 6:10pm Nigerian time, while the US West Texas Intermediate increased by $1.57 to $47.45 per barrel.
Concerns about rising output from the US, Libya and Nigeria continue to weigh on markets, however, and some analysts questioned whether the sharp rebound following the US government figures would be sustained.
The US Energy Information Administration said US crude inventories fell by 5.2 million barrels last week, which was more than the 1.8 million-barrel slide analysts predicted. Gasoline and distillate stocks also fell, supporting a market that has sold off sharply in recent weeks due to persistently high US inventories.
“US crude oil production is now solidly above 9.3 million barrels per day with more to come, and refined product, especially for gasoline, is oddly weak,” said a partner at hedge fund Again Capital in New York, John Kilduff.
“It is difficult to see how the day’s gains last.”
Brent and US light crude futures contracts closed on Tuesday at their second lowest levels since November 29, the day before OPEC announced it would cut output in the first half of 2017.
Prices surged after that deal, but have come under pressure in recent weeks as US production has climbed, undermining OPEC-led efforts to balance supply with demand.
Also supporting prices were comments from Algeria’s energy minister on Wednesday that Algeria and Iraq favour extending global supply cuts when OPEC meets later this month.
On Monday, Saudi Arabia’s Oil Minister, Khalid al-Falih, said he expected the output deal to be extended to the end of the year or possibly longer.
State-owned Saudi Aramco will also reduce oil supplies to Asian customers by about 7 million barrels in June, a source told Reuters, as part of OPEC’s deal to reduce production.
Aramco had previously maintained supplies to important Asian customers.
Questions remain about the effectiveness of OPEC-led cuts, with OPEC member Libya saying the country’s production exceeded 800,000bpd for the first time since 2014 and could rise to 1.2 million bpd later this year.
Nigeria, which along with Libya is exempt from OPEC cuts, is also expected to see a jump in output soon as Shell tests the Trans Forcados oil export pipeline before it restarts.
While the market braced for the return of Forcados, traders said they would likely demand a discount to buy the grade until its loadings proved reliable.
There was still a surplus of other cargoes, with more than 20 cargoes available. July loading programmes due next week.
India’s HPCL had provisionally booked the VLCC Dalian to load Qua Iboe in June, according to shipping fixtures. Buying from India helped support Qua Iboe values in recent weeks.
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