Crude-oil prices eased on Friday, though they are poised to end the week more than 3% higher, with traders expecting the global oil cartel to extend a production-cut deal when the group meets later this month.
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Brent crude, the global oil benchmark, fell 0.4% to $50.55 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.4% at $47.65 a barrel.
The latest report from the Organization of the Petroleum Exporting Countries published Thursday showed that cartel members were sticking to the production quotas agreed on Nov. 30. In April, OPEC's total output dropped again to an average of 31.73 million barrels a day. This means the cartel's production has fallen by more than the 1.2 million barrels a day that it had pledged in November.
The OPEC report, however, also revised growth in oil supplies from countries outside of the cartel membership upward to 950,000 barrels a day this year. The new forecast is based largely on higher-than-expected output growth from U.S. shale-oil producers and Canadian oil-sands operations.
The growth in non-OPEC output is expected to prompt the cartel to agree to extend its production cuts into the second half of the year when it meets on May 25. "The odds of a larger and longer cut now outweigh the odds of nothing, no cut at all," said Scott Shelton, a broker at ICAP PLC.
Still, prices won't likely rebound quickly because of accelerating production from countries including the U.S., Brazil, Canada, and even OPEC members Nigeria and Libya. Indeed, the decline of oil inventories, particularly in the U.S., has so far been slower than analysts had anticipated.
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"Capped OPEC/Russian production and accelerating seasonal demand into 3Q17 should see a greater drawdown in oil inventories; this assumes the 2016 Vienna output deal is reaffirmed on 25 May," said Giovanni Staunovo, analyst in UBS Wealth Management.
OPEC will also be mindful that U.S. producers will likely expand output and take more market share away from the cartel the longer it curbs production, said Tom Pugh, a commodities economist at Capital Economics.
"As such, it is likely to extend its production cuts by the minimum amount of time necessary to bring stocks down to more normal levels," he noted.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.2% to $1.56 a gallon. ICE gasoil changed hands at $448.75 a metric ton, down 25 cents from the previous settlement.
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(END) Dow Jones Newswires
May 12, 2017 06:03 ET (10:03 GMT)