Has the oil market grown weary of OPEC's promises?


"While most remain optimistic over Opec extending the production deal at the upcoming meeting on 25 May, it becomes a question of how United States shale reacts and if (American) pumping intensifies". Brent crude, the global benchmark grade traded in London, rose 1.3%, or 69 cents to $53.31. That boosted oil prices immediately after the data, with U.S crude futures bouncing to a high of $49.50 a barrel before retreating modestly.

Algerian proposal Algeria, which was instrumental in crafting Opec's historic output deal past year, has cut production by 55,000 barrels a day, according to Boutarfa, who sees field maintenance in May and June trimming its output by a further 15%. OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

Investors "seem to have lost confidence in OPEC's ability to reduce supply in the market", according to Capital Economics.

A decision will be made at a regular meeting in Vienna on May 25. Brent rose 81 cents to $52.45/bbl.

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"I think this market will rebalance itself very quickly".

In the oil market, Russian Federation and Saudi Arabia said this week they're in favor of extending output curbs by the Organization of Petroleum Exporting Countries and its partners until March to shrink global stockpiles.

The downward correction eroded gains from the previous session when prices rose on the back of a drawdown in USA crude inventories and a slight dip in American production. Also, the continuous rise in US production, which has increased by more than 10% since mid-2016 to 9.3 million bpd may also increase the supply of oil, said a market analyst.

The combination of an extension of the OPEC/Non-OPEC production cuts and the sixth consecutive week of lower US crude stocks is encouraging short-sellers to bail out of their positions at this time.

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"All options are open", one source said.

US crude stockpiles declined 1.75 MMbbl to 520.8 MMbbl last week, down from a record 535.5 million at the end of March, according to the Energy Information Administration.

Nevertheless, the drawdowns, though slow, will encourage the OPEC members and their allies to extend the deal and probably deepen the cuts further to speed up the rebalancing of the crude oil market.

But government figures on Wednesday showed the first week-to-week drop in domestic oil production since February, a development which also helped lift crude prices this week and get light, sweet crude back toward $50.

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In recent years Saudi Arabia, concerned with the increase in US shale gas production, increased its oil output to drive down prices in a bid to make shale gas exploration economically unattractive.