Oil up on falling USA inventories, Saudi cuts to Asia

Brent was 69 cents higher, or 1.4 percent, at $50.91 a barrel by 12:07 p.m. EDT (1607 GMT) after hitting a high of $51.16.

Stockpiles probably dropped by 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday.

Oil prices have fallen amid a consistent increase in United States crude output that undermined the impact of the reports that the ongoing OPEC-led output cuts may be extended.

For the week ended May 3, the EIA said that crude oil inventories fell by 5.25 million barrels, which confounded expectations of a draw of 1.79 million barrels.

In the USA, crude stockpiles posted their biggest weekly drawdown since December last week as imports dropped sharply, while inventories of refined products also fell.

The seeming easy availability of crude despite the output cuts helped drive crude prices lower, with Brent dropping as low as $46.64 a barrel on May 5, just above the close of $46.38 on November 29, the day before OPEC and its allies announced the deal to trim production and down about 20 percent since its recent peak in early January.

OPEC and other oil producers taking part in output cuts have reached a consensus to extend the limits until the end of the year, oil ministers for two of the group's members said.

OPEC is set to give further talks on May 25, concerning of whether to extend the settlement to cut production output for an additional six-months before the year ends.

Brent crude has endured a volatile past few years, plummeting from more than $100 a barrel in 2014 to less than $30 last year.

The Commitment of Traders report from the CFTC shows that money managers have taken their bets for upside in crude to the lowest levels in 5-months, which was amplified by a near 40% rise in hedge fund short positions.

"It is starting to become clear that if the objective of the OPEC cuts was to flip the market from surplus into deficit that is now slowly beginning to happen", he said and pointed to the chart below. Saudi Aramco will reduce supplies to Asian customers by about 7 million barrels in June.

It raised its estimate of total oil supply growth from non-Opec producers this year to 950 000 bpd from a previous forecast of 580 000 bpd.

On May 8, 2017, Saudi Arabia's energy minister said that OPEC (Organization of the Petroleum Exporting Countries) would work towards rebalancing the oil market to support oil prices.

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