Oil prices higher as OPEC grapples with oversupply

March 30, 2017 10:18 AM

Oil prices rose further on Thursday, building on two days of increases after Kuwait gave its backing for an extension of OPEC production cuts in an attempt to reduce global oversupply.

Brent crude oil was up 20 cents at $52.62 a barrel by 1330 GMT (9:30 a.m. ET). U.S. crude oil was 45 cents higher at $49.96 a barrel.

Both benchmark crude contracts rose more than $1 a barrel on Wednesday to their highest levels for two weeks, rebounding from four-month lows. The futures contracts appeared to be searching for a new trading range, brokers said.

"There is a significant chance that a short-to-medium-term bottom has been found," said Tamas Varga, an analyst at London brokerage PVM Oil Associates.

Kuwait oil minister Essam al-Marzouq said on Thursday his country was among several nations supporting the extension into the second half of the year of a deal between OPEC and other exporters to limit production, state news agency KUNA reported.

The Organization of the Petroleum Exporting Countries has agreed to reduce its oil production by 1.2 million bpd during the first six months of 2017 and so far most OPEC members appear to be sticking to the deal.

A Reuters survey showed OPEC oil output has fallen for a third straight month in March and members have now complied with 95 % of their commitments under the deal.

Oil production in Libya has also fallen sharply this week as output from its western oilfields of Sharara and Wafa has been blocked by armed protesters.

But OPEC is still finding it hard to tighten the oil market because inventories in many parts of the world are at or near record highs.

U.S. crude stocks rose 867,000 barrels to a record of nearly 534 million barrels last week, the Energy Information Administration (EIA) said on Wednesday.

Other oil exporters outside OPEC, including Russia, have also promised to cut production but so far those reductions have been limited. Russia has promised to cut output by 300,000 bpd.

"It is highly unlikely Russia will achieve an absolute 300,000 bpd reduction during the tenure of the current agreement," Eurasia Group said in a research report.

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