OPEC, non-OPEC committed to inventory cut

As oil prices sag despite OPEC's renewed efforts to shore up world crude markets, Wall Street banks have more bad news for the producer group: the outlook for next year isn't great either.

The Organisation of the Petroleum Exporting Countries (Opec) and other producers, including Russian Federation, agreed last week to extend a deal to cut production by about 1.8 million barrels per day (bpd) until the end of March 2018.

"The two countries (Nigeria and Libya) are still well below the expected output quota, it is in our interest to be friendly and brotherly, and exempt them so that they get the maximum revenue from the amount produced".

Oil futures have lost 8 percent since the Organization of Petroleum Exporting Countries and its allies agreed on May 25 to keep output constrained through the first quarter of 2018 in a bid to clear a global glut.

Industry data on USA oil inventories from the American Petroleum Institute (API) late on May 31 was seen buoying prices.

West Texas Intermediate light crude extended gains after the data and was 1.4%, or 68 cents, higher at $49 a barrel, as of 10:33 a.m. CT (15:33 GMT). Libya's output soared 210,000 barrels a day to 760,000 while Nigeria's gained 100,000 to 1.7 million after fields in both countries resumed output as internal strife eased.

Last week, OPEC and non-OPEC members led by Moscow agreed to extend cuts in output by a further nine months to March 2018.

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Analysts said the group is at risk of losing further market share to United States shale oil producers, which could cause compliance with the deal to slip in the second half of the year.

"Attention will be on USA inventory stocks tomorrow, with expectations of a further draw this week, following initial indications of strong demand for gasoline after the AAA said that driving mileage over the holiday weekend was the highest since 2005", said analysts at Cenkos Securities.

Standard Chartered, however, said it expects global crude inventories will return to their five-year average by the end of the OPEC-led production cuts, with large drawdowns in the second half of 2017.

The selloff in oil prices sustained during the later hours of the USA session yesterday continued on Friday, as investors mulled over the prospect of a ramp-up in US output after Trump announced that the U.S.is withdrawing from the 2015 Paris climate agreement.

Rising prices, which had tumbled from above $100 a barrel in 2014, have encouraged United States shale producers to increase drilling.

That followed the American Petroleum Institute saying US crude supplies fell 8.7 million barrels last week by its count.

According to Reuters surveys, a drop in output in Angola and Iraq and continued high compliance from Gulf producers Saudi Arabia and Kuwait helped lift OPEC's adherence with the supply cut deal to 95 per cent from 90 per cent in April.

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