Iraq, Algeria support extension of oil production cuts

The current version of the treaty, created to stabilize oil prices, expires in the summer. That topped forecasts for a draw of 1.9m barrels. That's increasing the burden on the world's biggest producers, who need to stick to their pledges to cut supply just to keep prices from falling, said Kho Hui Meng, the head of the company's Asian arm.

Opec and other producers including Russian Federation have pledged to cut output by nearly 1.8 million barrels per day during the first half of the year.

Any increase in the price of crude oil is simply going to send more people into the oil business.

One factor weighing on trader positioning is US crude production, which continues to climb and offset the impact of OPEC-supply cuts. Shale production will rise but not as fast as global demand.

OPEC is set to give further talks on May 25, concerning of whether to extend the settlement to cut production output for an additional six-months before the year ends.

In a monthly report, the Organization of the Petroleum Exporting Countries said outside producers would boost supply by 950,000 barrels per day (bpd) this year, up from 580,000 bpd expected previously.

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"OPEC nations have given up market share and have barely reaped any price gains", he said.

While crude oil inventory is falling, the gasoline inventory is rising.

Norwegian consultancy Rystad Energy said that "U.S. oil production has gained significant momentum" and that there was "limited downside risk in the short-term".

Yesterday it was a bullish report on inventory levels and a bigger-than-expected cut in Saudi supplies to Asia that launched the huge short-covering rally. This was the largest streak of back-to-back declines in U.S. oil stocks since September. What also may be overstated are fears about a slowdown in demand in India and China, which has increased the bearish oil sentiment. Continuing the trend for April, however, the U.S. Labor Department reported first-time claims for unemployment for the week ending May 6 was down 2,000 from the previous week.

Saudi Arabia notified several Asian refiners of its first cuts in crude allocations since OPEC's output reduction took effect in January.

If OPEC is "serious about getting the market to balance, it will have to cut deeper in order to "shock" the market and drive prices higher", said Shah. This is not an effective long term strategy however, as all this accomplished was creating new producers by enabling oil shale and oil sands producers to enter the market at these inflated rates which led to the current market glut.

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In recent market action, light, sweet crude futures for delivery in June climbed 57 cents, or 1.2%, to $47.90 a barrel on the New York Mercantile Exchange.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for June delivery traded up about 1.6% at around $46.61 a barrel, and it rose to $46.94 shortly after the report's release.

The first concerns a reasonable debate among analysts over how numerous barrels that have disappeared into the Asian data fog since 2014 were consumed or just stockpiled.

"I am still watching the US summer gasoline demand", said Vitol's Kho.

For that reason, some market watchers believe further cuts from OPEC would be misguided.

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