Oil prices rose on Thursday, with global benchmark Brent crude trading comfortably above $50 a barrel after a fall in US inventories and a bigger-than-expected cut in Saudi supplies to Asia helped tightened the market.
Brent LCOc1 was 30 cents higher at $50.52 a barrel by 0715 GMT. U.S. light crude oil CLc1 was up 35 cents at $47.68.
“We saw the biggest draw in [US] inventories for the year last week with stockpiles down more than 5 million barrels, and it looks like OPEC’s production cut is finally biting,” said Greg McKenna, chief market strategist at brokerage AxiTrader.
The Organization of the Petroleum Exporting Countries and other producers including Russia have agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year to try to reduce a global fuel glut.
OPEC meets on May 25 to decide on production policy for the second half of 2017, and most analysts expect the group to extend cuts until at least the end of the year.
OPEC has reduced production as promised, but there have been few signs so far that supply has fallen significantly as producers have shielded many key customers, especially in Asia, from cuts.
However, after Brent fell below $50 a barrel last week, analysts said producers felt forced to act.
Saudi Arabia notified several Asian refiners of its first cuts in crude allocations since OPEC’s output reduction took effect in January. Saudi Aramco will reduce supplies to Asian customers by about 7 million barrels in June.
“OPEC and non-OPEC members have shown commitment to production cuts and an extension of the agreement … will assist in drawing stocks over Q3 and stabilizing the market,” BMI Research said in a note.
In the United States, crude stockpiles posted their biggest weekly drawdown since December last week as imports dropped sharply, while inventories of refined products also fell.
Crude inventories USOILC=ECI fell 5.2 million barrels in the week to May 5, the US Energy Information Administration said. At 522.5 million barrels, crude stocks were the lowest since February.
While US oil inventories fell, the country’s crude oil production C-OUT-T-EIA continued to rise, jumping above 9.3 million bpd last week, in what is now a more than 10 percent increase since its mid-2016 trough.
Reporting by Christopher Johnson in London; Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson