Oil adds to rally on optimism over declining stocks

OilSINGAPORE: Oil prices firmed on Wednesday to hold near eight-week highs hit in the previous session, on expectations of a drawdown in U.S. stocks and as a rise in shale oil production shows signs of slowing.

Brent crude futures rose 32 cents, or 0.6 percent, to $50.52 a barrel by 0142 GMT, after rallying more than 3 percent on Tuesday.

U.S. West Texas Intermediate futures rose 42 cents, or 0.9 percent to $48.31 a barrel.

U.S. crude stocks fell sharply last week as refineries boosted output, while gasoline inventories increased and distillate stocks decreased, data from industry group the American Petroleum Institute showed on Tuesday.

Crude inventories fell by 10.2 million barrels in the week ending July 21 to 487 million, compared with expectations for a decrease of 2.6 million barrels.

The market has been buoyed by Saudi Arabia’s announcement at a meeting of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers on Monday that it will limit crude exports to 6.6 million barrels per day (bpd) in August, down nearly 1 million bpd from a year earlier.

Nigeria also agreed to join the deal by capping or cutting its output from 1.8 million bpd once it stabilizes at that level.

“This has seen expectations of further drawdown in inventories increase,” ANZ said in a research note, referring to the Saudi plans.

There was also optimism over U.S. shale gas output amid industry comments that North America’s rig count may be plateauing.

On Monday, Anadarko Petroleum Corp said it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major U.S. oil producer to do so, after posting a larger-than-expected quarterly loss.

Oil prices have come under pressure from an oversupply of crude around the globe, brought on in part by rising production from U.S. shale regions.

Indonesia’s energy minister said on Tuesday that Southeast Asia’s top crude producer would be open to rejoining the Organization of the Petroleum Exporting Countries (OPEC) as long as it is not forced to curb its own crude oil production.