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UPDATE 2-Oil rebounds on U.S. stocks drawdown, but declining OPEC compliance weighs

Published 03/05/2017, 04:52 pm
Updated 03/05/2017, 05:00 pm
© Reuters.  UPDATE 2-Oil rebounds on U.S. stocks drawdown, but declining OPEC compliance weighs
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* Drawdown in inventories supports WTI, Brent oil futures

* Global supplies remain near record high despite OPEC cuts

* Market awaits EIA data at 1430 GMT for price direction (Updates prices, adds Russian output cuts)

By Naveen Thukral

SINGAPORE, May 3 (Reuters) - Crude oil prices bounced back on Wednesday as a decline in U.S. inventories underpinned the market, although a dip in compliance with OPEC efforts to reduce output and near record supplies capped gains.

The benchmark for global oil market, Brent futures LCOc1 gained 47 cents, or 0.9 percent to $50.93 a barrel by 0641 GMT.

U.S. West Texas Intermediate crude CLc1 rose 37 cents, or 0.8 percent, to $48.02 a barrel.

On Tuesday, WTI slid 2.4 percent to its lowest close since March 21 and Brent closed at its lowest level this year, erasing all of the gains made since OPEC agreed to reduce production in November.

"There is precautionary buying following API data and leading to EIA data tonight," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"The lower oil gets, there is potential for forming a base. We are near lows made in March both in Brent and West Texas and if we do see, as many expect, a good run of draw in inventories into the summer, I think there is some upside potential."

U.S. crude stocks fell last week, and both gasoline and distillate inventories also dropped, data from industry group the American Petroleum Institute (API) showed on Tuesday. API/S

Crude inventories fell by 4.2 million barrels in the week ended April 28 to 528.3 million barrels, compared with analyst expectations for a decrease of 2.3 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 215,000 barrels, API said.

The U.S. government will release its Energy Information Administration (EIA) inventory data on Wednesday at 1430 GMT.

"The supply of crude oil continues to decline. This is evident in both spot and forward supply data," commodities brokerage Marex Spectron said in a note.

"Demand remains strong and in spite of lower refinery profitability we see increasing capacity utilization rates."

Production from the Organization of the Petroleum Exporting Countries (OPEC) fell for a fourth straight month in April, a Reuters survey found on Tuesday, as top exporter Saudi Arabia kept production below its target while maintenance and unrest cut production in exempt nations Nigeria and Libya. more oil from Angola and higher UAE output than originally thought meant OPEC compliance with its production-cutting deal slipped to 90 percent from a revised 92 percent in March, according to Reuters surveys.

OPEC pledged to reduce output by about 1.2 million barrels per day (bpd) for six months from Jan. 1 - the first supply cut deal since 2008. Non-OPEC producers are cutting about half as much.

Russia had cut oil output by 300,790 barrels per day as of May 1 compared with October 2016, Russia's Energy Ministry said on Wednesday. oil discharged on ships worldwide in April was near a record high of 45 million barrels per day, according to Thomson Reuters Eikon data.

This indicates supplies remain high, but it also implies strong demand, especially from Asia.

While OPEC countries are cutting production, exports of U.S crude oil to Asia have spiked.

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