Oil prices on Tuesday built on Monday's modest gains, supported by reports that Saudi Arabia will cut its supplies to Asia and the U.S., even as investors remain skeptical that production cuts led by Middle Eastern producers and Russia are helping to alleviate a years-long market glut.
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Brent crude, the global oil benchmark, rose 0.5% to $48.53 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.5% at $46.31 a barrel.
On Monday oil retraced a bit of last week's near-4% decline, helped by Saudi Arabia's energy minister expressing confidence that market rebalancing will soon gather steam and reports that the country would cut its exports to Asia and the U.S. in July. Seasonally Saudi Arabia's exports are lower over summer when its domestic demand for power peaks.
"In itself it's something that was expected, I think it would have had greater impact if it was done three months ago," said Olivier Jakob at Switzerland-based consultancy Petromatrix.
Late last year, members of the Organization of the Petroleum Exporting Countries and major non-U. S. producers such as Russia agreed to reduce their production starting in January. Even though the deal was recently extended to next March, investor faith in the deal has greatly faded as analysts say U.S. shale producers have boosted output while other have reduced theirs, keeping the world awash with oil.
"Indications that crude arrivals into major markets have been impacted by supply cuts are so far limited at best," said consultancy JBC Energy.
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Meanwhile, production has been rebounding in Nigeria and Libya, two OPEC nations not included in the output-cut deal.
"If the two troubled oil producers can really ramp up their production in coming months to their target levels, say 2 million barrels per day and 1 million bpd respectively, it would add another 850,000 bpd of oil to the organizations' output," said Tamas Varga at brokerage PVM.
The lack of compelling physical tightening in the market this year has knocked Brent futures down some 15% this year. Signs of progress in cutting global inventories could come via OPEC's monthly oil report due later Tuesday.
Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.1% to $1.49 a gallon. ICE gas oil changed hands at $427.00 a metric ton, down $2.50 from the previous settlement.
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(END) Dow Jones Newswires
June 13, 2017 06:19 ET (10:19 GMT)