Oil rises as expected extension of OPEC cuts counters rising U.S. supplies

EIA forecasts Brent-WTI price spread narrowing to $4 per barrel in 2018

The uptick in United States crude production added to recent fears that USA producers are set to ramp up output after the IEA said on Tuesday that it expected global crude markets to remain oversupplied through the second quarter of 2018 amid an uptick in U.S. production.

This week has so far seen several oil market-quakes that have affected prices seriously enough for EIA's figures to add their own force to the blows rattling the markets.

OPEC and other big exporters including Russian Federation agreed a year ago to cut crude output by 1.8 million barrels per day (bpd) between January this year and March 2018 to try to bolster prices.

"The oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2018".

"The oil market should be able to find a longer-term equilibrium, with the oil price in a range of $50-70 a barrel", the agency said.

USA crude oil production has jumped more than 14 per cent since mid-2016 to 9.65 million bpd and is expected to grow further. The producer group raised its forecast for demand growth by 130,000 barrels a day in 2018.

Oil ministers have signalled that they are likely to extend the agreement, possibly until the end of next year.

Brent crude futures, the worldwide benchmark for oil prices, were at $61.98 a barrel at 4.38am GMT, 11c above their last close.




"I think this group of committed and responsible producers came together. and I think they will continue to do what it takes to take us to the next level", he said at an worldwide oil conference.

Oil prices have risen steadily over the last few months as the impact of supply cuts has drained inventories.

After hitting a 10-year low of less than $30 in January, down from a peak of more than $100 in mid-2014, oil prices have recently been hovering around the $55 mark.

The Energy Information Administration is out with the government's numbers this morning.

Direct WTI-Brent competition in global markets has been another contributing factor to the price spread, EIA reported.

Brent crude futures were down 43 cents a barrel at $61.44 as of 12:17 PM EST (1717 GMT).

Chris Watling, CEO and chief market strategist at Longview Economics, was quoted as saying that the adoption of EVs could lead to global peak oil demand as soon as 2023, which will result in oil prices crashing to $10.

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