"Although OPEC's extension of production cuts should hold oil's gain, the political risks we are seeing in the USA may discourage investments and that certainly won't be a good sign for an oil rally".
The small move higher Tuesday put both Brent and U.S. futures on track to rise for a fifth day in a row.Kuwait's oil minister, Essam al-Marzouq, backed the previous day's agreement by Saudi Arabia and Russian Federation on the need to extend a crude output cut by OPEC and other producing countries of 1.8 million barrels per day (bpd) until the end of March next year.
It is widely expected an extension will occur, and energy officials from Saudi Arabia and Russian Federation this week signaled they back a nine-month extension. West Texas Intermediate crude trading on the New York Mercantile Exchange for June delivery settled 28 cents, or 0.6%, higher at $49.35 a barrel.
As per the UBS oil analyst Giovanni Staunovo, there is 60% probability of OPEC extending output cuts and this should help tighten the oil market.More news: Cannes: Pedro Almodovar, Will Smith Offer Contrasting Views on Netflix Controversy
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"The effects of higher crude runs may not have fully filtered through yet, with stocks of unfinished oils having risen strongly over recent weeks, meaning that the headline categories should start to reflect some of this in the near future", he said.
Overall the IEA's global demand outlook has been revised down only by a marginal 45,000 barrels per day (bpd) compared to last month's report and is now seen at 1.3 million bpd. 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.
"I think the cuts are enough to stabilize the market. The overall outlook for the non-OPEC countries, 11 of which are voluntarily cutting production to support OPEC, shows growth in 2017 of almost 600,000 b/d, an increase on the 490,000 b/d seen in last month's report".
Output slipped to 9.305 million barrels a day last week from 9.314 million in the prior week. U.S. light crude rose 18 cents to $48.84, Reuters reported. However, it will be complicated not just by rising production in Libya but also by shale producers in the United States and the rising crude oil inventory in the world's biggest economy.