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CORRECTED-UPDATE 7-Oil rises ahead of OPEC, key producers pledging cuts

Published 19/05/2017, 02:38 am
© Reuters.  CORRECTED-UPDATE 7-Oil rises ahead of OPEC, key producers pledging cuts
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(Corrects headline to reflect oil is up not down)

* Russia's Rosneft agrees to adhere to production cuts

* U.S. crude inventories fall less than expected

* Oil supplies ample despite OPEC-led production cuts

* Record volumes of North Sea, U.S. oil shipped to Asia

By Julia Simon

NEW YORK, May 18 (Reuters) - Oil prices rose on Thursday in a volatile session on growing signs that key oil producers will adhere to production cuts at next week's OPEC meeting amidst a persistent global glut.

Brent crude LCOc1 rose 30 cents a barrel to $52.51 by 11:30 a.m. EDT (1530 GMT). U.S. crude oil CLc1 rose 30 cents to $49.37.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia pledged to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2016, a deal likely to be extended until the end of March 2018. from OPEC and other producers meet in Vienna on May 25 to decide on output policy. The group is expected to prolong its agreement to limit production for up to nine months.

Russia's largest oil producer Rosneft will meet its agreements with OPEC on oil output reductions, Igor Sechin, Rosneft chief executive, told reporters in Berlin on Thursday. crude oil benchmarks rose on Wednesday after news of a drawdown in U.S. crude inventories and a dip in U.S. output. The U.S. Energy Information Administration said inventories USOILC=ECI fell 1.8 million barrels in the week to May 12 to 520.8 million barrels. addition to U.S. crude stocks drawing down for the sixth consecutive week, the EIA showed an increase in refining rates.

But Michael Dei-Michei, head of research at JBC Energy in Vienna, said the market should consider that intermediate products - gas oils, diesel oil and other products - are not featured in the headline EIA numbers, and those stocks are rising, which could lead to higher finished product inventories. That could slow the supply drawdown.

"The effects of higher crude runs may not have fully filtered through yet, with stocks of unfinished oils having risen strongly over recent weeks, meaning that the headline categories should start to reflect some of this in the near future."

"The effects of higher production could become a lot more visible in the next few weeks," he said.

A surplus of U.S. supply has led to large volumes of crude being exported from the United States to northern Asia, undermining OPEC-led efforts to tighten the market.

Shipping data in Thomson Reuters Eikon shows that U.S. crude exports to Asia have soared from a handful of tankers a quarter throughout 2015 and 2016 to 10 tankers in the first quarter of 2017 and that figure is expected to rise.

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