Oil up after United States inventories drop

Khalid al-Falih, Saudi Arabia's energy minister, was quoted in the Financial Times saying he expected OPEC to extend its production deal until at least the end of 2017 when they meet on 25 May, stating the cartel is prepared to do "whatever it takes" to bring about an end to low oil prices.

US energy firms added oil rigs for a 16th week in a row last week extending a drilling recovery into a 12th month, energy services firm Baker Hughes Inc said on Friday.

Global benchmark Brent crude LCOc1 settled up $1.49 a barrel, or 3 percent, to $50.22 a barrel.

Oil prices rose on Wednesday after a larger than expected fall in USA crude inventories and on attempts by Opec to rebalance an oversupplied market by cutting output.

According to Opec's latest monthly report a large part of the excess supply overhang contained in floating storage facilities has been reduced and the improvement in the world economy should help support oil demand too.

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.

Exchange-traded funds linked to oil prices, continued to climb today as crude prices remained on track to end the week in the green amid data showing that the US crude glut is shrinking and OPEC's production cuts are making a dent in global supplies. Additionally, investors were also demonstrating a lack of confidence in OPEC's ability to rebalance the market through planned production cuts.

Oil prices rose on Monday on a growing conviction that an OPEC-led production cut initially scheduled to end in June would be extended to cover all of 2017, although a relentless increase in US drilling activity is seen capping gains.

Oil major Saudi Aramco has told Asian refiners it will reduce supplies by about seven million barrels in June.

Non-cartel producers led by Russian Federation partially matched the cuts.

A third source said an extension of up to one year could be an option.

Oil is now changing hands near $50 again and it seemed that OPEC is likely losing its grip to influence prices as a new wave of new supply is striking the market from Texas to Libya.

Falih said recent price falls had been caused by seasonal low demand and refinery maintenance, as well as by non-OPEC production growth, especially in the United States.

Meanwhile, Brent crude oil, the global benchmark, is up 1.9% at $49.89 per barrel on Wednesday, and has lost 12.4% this year.

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