Oil up on drop in US petroleum stocks, possible OPEC cut extension

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Some analysts questioned whether the staying power of the sharp price rebound after the U.S. Energy Information Administration said crude inventories fell 5.2 million barrels last week, much more than the 1.8 million-barrel slide analysts predicted.

Oil prices edged up on Tuesday, driven by anticipation that an OPEC-led pledge to cut production would be extended beyond the first half of the year and into 2018, although overall high supply still weighed on markets.

Brent futures LCOc1 soared by 19 cents to reach $48.92 a barrel, while the US West Texas Intermediate (WTI) crude CLc1 gained 23 cents and traded at $46.11 per barrel, reported Reuters.

While traders remain mostly pessimistic about oil prices, some are arguing the market is well on its way toward balance. US light crude oil was $1.81 higher at $47.69 a barrel.

Oil prices have erased the gains achieved since November, when OPEC and other producers, including Russian Federation, agreed to cut output by about 1.8 million barrels per day (bpd).

OPEC has reduced output 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.

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OPEC monthly report also found that world oil supply growth for the year was increased by 37,000 barrels per day with supply to now average 58.3 million barrels per day.

"We saw the biggest draw in (U.S.) 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.

"It is all about sentiment and perception".

As oil dropped below $50 last week, analysts expect producers will be forced to continue the cuts.

As a result, global benchmark Brent crude was up $1.24, or 2.5% at $49.97 USA a barrel mid-morning Wednesday.

In the United States, U.S. crude stockpiles posted their biggest one-week drawdown since December last week as imports dropped sharply, while inventories of refined products also fell. OPEC member Libya said its production exceeded 800,000 barrels per day (bpd) for the first time since 2014 and could rise to 1.2 million bpd later this year.

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