Saudi Arabia and non-Opec Russia, the world's top two oil producers, have agreed on the need to prolong the current cuts until March 2018, although Saudi Energy Minister Khalid al-Falih said extended curbs would be on the same terms.
The decision by Russian Federation and Saudi Arabia to drive up oil prices by extending the production cuts to 2018 points to a deepening alliance between the two countries.
On Wednesday, the rise in both benchmarks was seen after the news of drop down came in USA crude inventories and a dip in US output.
Meanwhile, the price for June futures of West Texas Intermediate (WTI) has grown by 0.75 percent and stood at $49.72 per barrel.
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"In contrast, oil supply in 2017 was revised up by 0.36 million barrels per day to average 58.25 million barrels per day - representing year-on-year growth of 0.95 million barrels per day, following changes in all quarters, mostly in the United States, based on USA actual production data from February and new forecasts for crude oil output".
Michael Wittner, global head of oil research at Societe Generale, said the market was well on its way toward bracing for an Opec cut. The EIA still expects USA production to average 9.31 million bpd in 2017.Crude stocks have been edging lower after hitting a record 535.5 million barrels at the end of March.
OPEC didn't give USA shale enough respect In the International Energy Agency's (IEA) latest monthly report, estimated inventories in industrialized nations totaled about 3.025 billion barrels on March 31.
In addition to USA crude stocks drawing down for the sixth consecutive week, the EIA showed an increase in refining rates. Though there is no authentic source of getting oil inventory data, analysts say that crude oil floating inventory is between 800 million to 1 billion barrel. Analysts estimate that every dollar increase in the oil price between $45 and $55 a barrel results in an additional 1.2 billion barrels that become economical to produce.
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Output slipped to 9.305 million barrels a day last week from 9.314 million in the prior week.
OPEC and other producers are due to discuss an extension during an OPEC meeting on Thursday. That works somewhat in USA drillers' favor because they heavily hedge their production, Currie explained, meaning they lock in a future price for delivery.
But the International Energy Agency said Tuesday that just extending the cuts wouldn't be enough to bring markets in balance.
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