Oil prices rose on Friday as traders expected OPEC-led production cuts to extend beyond the middle of this year.
On Thursday, oil prices rallied as a larger-than-expected weekly draw in USA crude inventories C-STK-T-EIA of 5.3 million barrels suggested that output cuts by the Organization of Petroleum Producing Countries (OPEC) and other producers were helping reduce a global glut in crude, analysts said.
In the deal from November 30, OPEC pledged to cut 1.2 million bpd of its production, while Azerbaijan, Bahrain, Brunei Darussalam, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Russia, Republic of Sudan, and Republic of South Sudan committed to a collective cut of 558,000 bpd.
Eleven Non-OPEC producers also are expected to extend their commitment to decrease oil output by 558,000 b/d.
"OPEC is now recognizing they need longer - and potentially deeper - production cuts than they have anticipated", said Jamie Webster, a senior director for oil at the Boston Consulting Group Inc.in NY.
On Thursday, OPEC's own monthly oil market report said that production from non-members would rise 64 percent faster than previously forecast this year, driven mainly by USA shale fields.
OPEC will also be mindful that USA producers will likely expand output and take more market share away from the cartel the longer it curbs production, said Tom Pugh, a commodities economist at Capital Economics. Saudi Arabia, the de-facto OPEC leader, has said it expects cuts to be extended.
Oil fell as investors focus on all the production that OPEC can do nothing about.
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According to the report, this was the biggest among oil producers as Nigeria makes move to over-take Angola and retain its position as biggest oil producer in Africa. US light crude CLc1 was up 1 cent at $47.84.
Oil prices fell modestly on Friday, pulling back after two days of gains, as concern over US production took some of the shine out of optimistic signals from OPEC this week about output cuts.
That may not be reflected in prices, which are barely 4% higher than last September, just before the coalition laid the groundwork for its deal to reduce production.
OPEC has asked a favor of other major producers: Please stop pumping so much and help us balance the market.
According to the U.S. Energy Information Administration, American crude production will surpass the 10 million barrel a day mark by late next year, breaching the record high set in 1970.
Citi analysts argue that the overarching expectation in recent years that prices would soon top US$60 per barrel may have given producers a false sense of security.
The strategy pushed prices well below $30 per barrel and forced many USA producers to scale back in 2015 and 2016.