Oil drops on rising US crude inventory, defies expected supply cut extension

Oil drops on rising US crude inventory, defies expected supply cut extension

Oil drops on rising US crude inventory, defies expected supply cut extension

Oil prices fell 1 percent on Wednesday after data showed an increase in U.S. crude inventories, stoking concerns that markets remain oversupplied despite efforts by top producers Saudi Arabia and Russian Federation to cut output.Brent crude futures were down 53 cents, or 1 percent, from their last close at $51.13 per barrel at 0028 GMT.U.S. July Brent crude on London's ICE Futures exchange fell $0.44 to $51.21 a barrel.

West Texas Intermediate crude was up 0.9% to $49.27 a barrel on Tuesday morning.

The fall in prices came just days after Saudi Arabia and Russian Federation said had on Monday that they agreed the need for a 1.8 million barrels per day (bpd) crude supply cut by the Organization of the Petroleum Exporting Countries (OPEC) and some other producers, including Russian Federation, to be extended for nine months, until the end of March 2018.

Kuwait's oil minister, Essam al-Marzouq, said on Tuesday he supported the Saudi/Russian initiative.

Following the Russia-Saudi statement, Kazakh Energy Minister Kanat Bozumbayev said "Kazakhstan should follow the trend", in comments reported by Russia's RIA Novosti agency.

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For OPEC to reach its goal of bringing global inventories back to the five-year average, the cartel will need to drain its supplies by 1 million barrels a day over the next 10 months, said Bernstein Research, calling the extension of the 1.8-million barrel per day cuts into 2018 as critical and logical.

"We have said many times that Oman is in support of anything that will raise and sustain the oil price".

Monday's gains come after the commodity was battered earlier this month on worries that the production cut was not enough to make a dent in a worldwide supply glut and increasing output from the U.S. and other nations. Libya and Nigeria, which have faced disruptions to production, were excluded from limits on their output.

"That such a large output cut extension is a tacit admission of failure is for another day and discussion", he said in a note.

U.S. shale producers have kept oil prices below Saudi Arabia's target of $60 a barrel, with supplies coming back online at faster rates than expected.

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