Higher US Crude Output Should Pressure Oil Prices

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U.S. crude production is expected to rise by more than previously expected in 2017 to 9.31 million barrels per day from 8.87 million bpd in 2016, a 440,000 bpd increase, the U.S. Energy Information Administration said.

The increase from Saudi Arabia comes as OPEC and its allies are likely to extend and possibly deepen their current output cut agreement to remove 1.8 million barrels of oil from the market.

Following the release, West Texas Intermediate, the USA crude marker, was up 2.5 per cent to $47.03 barrel, while Brent crude, the global oil benchmark, rose 2.4 per cent to $49.90 a barrel.

Oil prices rose on Monday as talk of further supply cuts by major OPEC exporters outweighed the prospect of higher USA production as a drilling boom spreads across North America.

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In the United States, crude stockpiles posted their biggest weekly drawdown since December last week as imports dropped sharply, while inventories of refined products also fell.

Saudi Arabia and Russian Federation, in response to the surge in U.S. shale production, have signalled they intend to continue to extend the deal reached to cut production by 1.8 million barrels per day in November.

Iraq - OPEC's second-largest producer and a country that relies on oil revenues for almost 95 percent of its budget - committed to reduce daily production by 210,000 barrels to 4.351 million.

In addition to the potential extension of the OPEC agreement into 2018, some ministers have also discussed the possibility of deepening their output cuts, said four delegates.

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Brent crude was up 40 cents at $49.50 a barrel by 0930 GMT.

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.

"US oil production surpassed expectations in terms of an early bottoming and swift uptick, and is set to expand further based on the latest drilling momentum", said Norbert Ruecker, head of macro and commodity research at Julius Baer.

A third Asian refiner is getting contracted volumes for June, steady from the previous month, a separate industry source said.

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In separate statements just hours apart on Monday, the world's largest crude producers said publicly for the first time they would consider prolonging their output reductions for longer than the six month extension widely expected to be agreed at the OPEC meeting on May 25.

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