Saudi Arabia hopes to extend oil cuts to end-2017 or longer

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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.

A larger than expected tumble last week in USA crude inventories supported the oil.

Iraq and Algeria said they were in favor of extending that deal, which cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year.

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.

Speaking at an industry event in Kuala Lumpur, Malaysia, Mr Al-Falih said he still expected an OPEC-led deal to cut output during the first half of the year to be extended to all of 2017. Aramco had previously been maintaining supplies to its important Asian customers.

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Brent crude futures were at $49.82 per barrel at 0323 GMT on Monday, up 72 cents, or 1.47 percent, from their last close.

Supply from the 11 OPEC members with production targets under the accord - all except Libya and Nigeria - fell to 29.674 million bpd last month, according to figures from secondary sources that OPEC uses to monitor output.

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

Crude oil prices drifted lower on Tuesday as investors continued to express concerns over slowing demand and the rise in USA crude output.

The bullish inventories report came in after crude prices dipped 1% when EIA highlighted its near-term outlook for US oil production and reiterates its estimates for oil prices. Additionally, investors were also demonstrating a lack of confidence in OPEC's ability to rebalance the market through planned production cuts.

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Oil Storage Tanks at Cushing, OKOil held gains before government data forecast to show US crude stockpiles fell for a fifth week, further reducing an inventory surplus.

Seven million barrels is roughly two days of oil imports into Japan, the world's fourth-biggest importer.

Non-cartel producers led by Russian Federation partially matched the cuts. Equatorial Guinea, which is Africa's third largest oil producer, said it had support from Saudi Arabia to join OPEC.

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.

The May report also changes to the EIA's earlier estimates for crude oil and refined product pricing for 2017.

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