Barkindo: OPEC, non-OPEC committed to restore market stability

The continued growth in USA production and the rise in stockpiles forced the market to respond bearishly based on the increased inventory outlook.

Volumes were thin, with over 127,000 Brent futures contracts and about 222,000 WTI contracts changing hands, more than 60 percent lower than Thursday's trading volumes.

American Petroleum Institute (API) reported that United States markets continue to remain oversupplied though crude inventories slipped by 840,000 barrels in the week up to 14 April to 531.6 million barrels.

According to a U.S. Energy Information Administration report, U.S. crude supplies fell 1 million barrels in the most recent week, a smaller decline than expected.

Currently, OPEC, the average daily production of which by the results of the first quarter amounted to 32.02 million barrels per day, actually balances supply and demand.

OPEC and other producers such as Russian Federation agreed to cut output by almost 1.8 million barrels per day in the first half of 2017 to drain a supply overhang that has persisted for nearly three years.

While US shale output may come "roaring back" amid higher crude prices, production curbs by Opec and its allies should help offset that increase over the next six to nine months, said the Citi analysts including Ed Morse and Seth Kleinman.

Crude production advanced 17,000 bpd to 9.25 million in the week ended April 14, the highest since August 2015. Distillate stockpiles fell a bit more than expected-down 2 million barrels last week.

USA crude imports rose last week by 56,000 barrels per day.

OPEC and top nonmember producers reportedly will meet May 25 as they remain publicly undecided over whether to extend production cuts. Gasoline supplies had been on the decline for eight straight weeks prior to Wednesday's data, and summer driving season, when gasoline demand peaks, is quickly approaching.

"We should see an accelerating level of crude draws, something we've been waiting for a while", Cavan Yie, senior equity analyst at Manulife Asset Management Ltd.in Toronto, said by telephone. On Thursday, before major markets closed for the holiday break, they settled up 3 cents at $55.89 a barrel.

The bank is referring to the Organization of the Petroleum Exporting Countries' production cutback initiative, now in its third month of implementation; the Citi analysts stress, however, that failure to extend the cuts to the end of this year will send oil prices "precipitously lower".

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