Oil futures rose on Wednesday after Reuters reported Saudi Arabia would cut supplies to the region as OPEC tries to counter rising U.S. output that is threatening to derail its attempts to end a sustained global crude glut.
Oil was also supported by a larger than expected fall in U.S. crude inventories last week, down 5.8 million barrels compared with analysts' expectations for a 1.8 million barrels decline, according to industry group the American Petroleum Institute. [API/S]
Global benchmark Brent futures LCOc1 were up 19 cents, or 0.4 percent, at $48.92 a barrel at 0612 GMT. They fell 1.2 percent on Tuesday.
U.S. West Texas Intermediate (WTI) crude CLc1 was up 23 cents, or 0.5 percent, at $46.11 a barrel.
State-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels in June, a source told Reuters, as part of OPEC's agreement to reduce production and as it trims exports to meet rising domestic power demand over summer.
Seven million barrels is roughly two days of oil imports into Japan, the world's fourth biggest importer. Aramco had previously been maintaining supplies to its important Asian customers.
"The Saudis are largely about Asian customers, so if they are trimming sales that is supportive at the margins," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
WTI also fell 1.2 percent in the previous session, and the closing price for both contracts on Tuesday was the second lowest since Nov. 29, the day before the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production during the first half of 2017.
Prices surged immediately after the agreement, but have come under sustained pressure in recent weeks as U.S. production has ramped up and pushed back the expected timing for when the oil market will come into balance.
"Chief among (the) oil market's worries is that the renewed rise in U.S. oil production is reducing the speed at which the supply surplus is being eroded," Fawad Razaqzada, market analyst at Forex.com, said in a note.
Saudi Arabia's energy minister Khalid al-Falih said on Monday he expected the output deal to be extended to the end of the year or possibly longer. OPEC meets later this month.
Higher crude output from the United States should limit any upside to global oil prices through the end of 2018, the U.S. government said on Tuesday.
U.S. crude production is expected to rise by more than previously expected in 2017 to 9.31 million barrels per day from 8.87 million bpd in 2016, a 440,000 bpd increase, the U.S. Energy Information Administration (EIA) said.
Official numbers on weekly U.S. crude and product inventories from the EIA are scheduled to be released 1430 GMT on Wednesday.
Source: www.reuters.com (Last Updated: 7:07 AM, 10-May-2017)