Hope seems to be rising for Nigeria and other oil producers as oil prices rose more than 3 per cent on Wednesday, bolstered by the biggest one-week drop in U.S. inventories so far in 2017.
The development came after Iraq and Algeria joined Saudi Arabia in supporting an extension to OPEC supply cuts.
According to the U.S. Energy Information Administration, crude inventories fell 5.2 million barrels last week, much more than the 1.8 million-barrel drop analysts had predicted.
Gasoline and distillate stocks also fell, supporting a market that has sold off in recent weeks due to persistently high U.S. inventories.
Production rose, however, and gasoline demand over the last four weeks was 2.5 per cent lower than at the same time period a year ago.
Global benchmark Brent crude, according to Reuters news agency, settled up $1.49 a barrel, or 3 per cent, to $50.22 a barrel.
U.S. light crude oil, on the other hand, ended up $1.45 higher at $47.33 a barrel.
“U.S. crude oil production is now solidly above 9.3 million barrels per day with more to come, and refined product, especially for gasoline, is oddly weak,” John Kilduff, partner at hedge fund Again Capital in New York, told Reuters.
“It is difficult to see how the day’s gains last.”
Global oil prices surged after the Organization of the Petroleum Exporting Countries, OPEC, agreed in November with some other producing countries to curb supply.
But prices, however, slumped in recent weeks due to rising U.S. production, which undermined the OPEC-led efforts to reduce a global crude glut.
On Monday, Saudi Arabia’s oil minister Khalid al-Falih said he expected the output deal to be extended to the end of the year or possibly longer.
Nigeria, which along with Libya is exempt from OPEC cuts, is also expected to see a jump in output soon.
The oil producers will meet on May 25 in Vienna to discuss possibility of extension.
Ibe Kachikwu, Nigeria’s oil minister, had earlier hinted that he expected an extension in the cut.
“I expect we (Nigeria) will get OPEC exemption but one year from now will it be renewed? I am not too sure,” he said.