Opec says oil deal bearing fruit, but US pumping more

Oil futures turned negative on Wednesday, pulling back after eight straight sessions of gains after USA crude inventory data suggested that the market was still heavily supplied.

The Energy Information Administration (EIA) said that next year, USA crude oil output would grow to 9.9 million barrels per day (bpd) from the current 9.22 million bpd.

"New data shows weaker-than-expected growth in a number of countries including Russia, India, several Middle Eastern countries, Korea and the USA, where demand has stalled in recent months", the agency said.

Opec is considering whether to extend the supply cut deal beyond June and most members, including Saudi Arabia and Kuwait, are leaning towards this if all producers, including non-Opec also agree, Opec sources told Reuters last month.

Brent for June settlement was 32 cents higher at US$56.55 (RM250) a barrel on the London-based ICE Futures Europe exchange as of 12:06 p.m. local time.

Latest OPEC data showed members had cut March output beyond what they had promised.

In November of past year, OPEC and other producers, including Russian Federation agreed to cut output by about 1.8 million barrels per day during the first half of 2017 in a bid to reduce a global supply glut and rebalance the market.

The group's in-house analysts peg demand for the group's crude at 32.2 million bpd in 2017, suggesting bulging global inventories should start to tighten this year if their assessment is correct and output levels are maintained, even as a recovery in prices has spurred a jump in production from the United States shale patch.

OPEC upgraded its 2017 global demand growth forecast to 1.27 million barrels per day, an upwards revision of 10,000 barrels per day as thirst from Asia rises.

Saudi Arabia and Russian Federation are leading the agreement by the Organization of Petroleum Exporting Countries and other producers to curtail oil supplies and end a three year surplus.

Despite this output-cut initiative, the oil market remained largely oversupplied due to rising USA production and stockpiles.

With demand expected to rise by 340,000 bpd in 2018, that would leave increasing amounts of USA oil for export or storage.

OPEC is scheduled to meet on May 25 to discuss whether to extend output cuts of 1.2 million barrels per day for another six months.

A recent report from oil consultant Wood Mackenzie offered more good news for the offshore business.

With the increasing rig count pointing to rising supply, Tony Headrick, energy market analyst at CHS Hedging, said OPEC would be watching.

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