NEW YORK (Reuters) - Oil prices rose on Thursday ahead of next week’s OPEC meeting as key producing countries suggested they would adhere to production cuts to reduce a global crude glut.
Brent crude LCOc1 rose 30 cents a barrel to $52.51 at 2 p.m. EDT (1800 GMT). U.S. crude oil CLc1 rose 23 cents to $49.30.
Market watchers are growing more confident that the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia will extend output cuts of almost 1.8 million barrels per day (bpd) until the end of March 2018.
Russia’s largest oil producer Rosneft will meet agreements with OPEC on oil output reductions, Igor Sechin, Rosneft chief executive, told reporters in Berlin.
Both crude oil benchmarks rose on Wednesday after news of a drawdown in U.S. crude inventories and a dip in U.S. output. The U.S. Energy Information Administration said inventories USOILC=ECI fell 1.8 million barrels in the week to May 12 to 520.8 million barrels.
In addition to U.S. crude stocks drawing down for the sixth consecutive week, the EIA showed an increase in refining rates.
But Michael Dei-Michei, head of research at JBC Energy in Vienna, said the market should consider that intermediate products - gas oils, diesel oil and other products - are not featured in the headline EIA numbers, and those stocks are rising, which could lead to higher finished product inventories. That could slow the supply drawdown.
“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.
On May 25, leaders from OPEC and other producers will meet in Vienna to decide on output policy. The group is expected to prolong its agreement to limit production for up to nine months.
However Gene McGillian, VP of Market Research at Tradition Energy, says with increased production in Libya and Nigeria, as well as the United States, sticking to current cuts might not be enough.
“When you balance that cut with the increase in other areas it’s probably a net-net cut of half a million a day,” he said, “The question is whether that 1.8 million barrel cut is enough to cut that overhang.”
U.S. crude production has climbed 10 percent since mid-2016 to 9.3 million barrels per day, close to levels from top producers Russia and Saudi Arabia.
Additional reporting by Christopher Johnson in London, Henning Gloystein