Oil prices traded largely flat on Friday, supported by expectations of an extended OPEC-led production cut and falling US crude inventories but capped by concerns over global oversupply. International benchmark Brent crude futures were at $50.73 per barrel at 0814 GMT, down 4 cents, while U.S. West Texas Intermediate (WTI) crude futures were down 2 cents at $47.81 a barrel.
Analysts said a larger-than-expected fall in U.S. crude inventories last week, by 5.3 million barrels, continued to keep Brent above $50, with the data viewed as a possible sign OPEC-led cuts were tightening the market. The Organization of the Petroleum Exporting Countries and other producers including Russia have pledged to cut output by almost 1.8 million barrels per day (bpd) in the first half of the year.
OPEC and the other participating producers will meet on May 25 in Vienna to decide whether to extend the cuts and, potentially, agree a deeper reduction. Saudi Arabia, the de-facto OPEC leader, has said it expects cuts to be extended. “The (U.S. crude) inventories turned the heads of market participants towards the more positive side of things,” said Eugen Weinberg, Commerzbank head of commodities research.
“But nevertheless the problem remains that the oil supplies are still there, the overcapacity is still there, the stocks are still quite high,” he added. Norwegian consultancy Rystad Energy said “U.S. oil production has gained significant momentum” and there was “limited downside risk in the short term”. “U.S. Lower 48 (all states excluding Alaska and Hawaii) oil production is set to expand by an additional 390,000 bpd from May 2017 to December 2017 assuming a WTI price of $50 per barrel,” Rystad said.
U.S. crude production has risen more than 10 percent since its mid-2016 trough to more than 9.3 million bpd, close to the levels of top producers Russia and Saudi Arabia. A weekly report by Baker Hughes monitoring U.S. rigs drilling for new production is due on Friday.