Published: Sat, May 06, 2017
Markets | By Terence Owen

Oil down on lower than expected drop in United States inventories

Things only fully stabilised when Saudi Arabia's OPEC chief hit the wires in European hours, saying there was a growing consensus among oil pumping countries that they needed to continue to "rebalance" the market.

"There's an emerging consensus among participating countries on the need to extend the production agreement reached previous year", Adeeb Al-Aama told Reuters.

OPEC, Russia and other producers have agreed to curb production by 1.8 million barre1ls per day until June 30.

OPEC sources said on Thursday that OPEC is likely to extend cuts when it meets on May 25, but that a deeper cut is unlikely. It is the lowest since March because of the lower than expected decline in USA inventories, showed data. This is higher than OPEC achieved during its last cut in 2009.

Closing prices, below $50 a barrel, were the lowest since November 29, thereby erasing all the market gains that followed a late 2016 announcement by the Organization of the Petroleum Exporting Countries it would cut output. "The rout in markets is unlikely to turn around quickly", ANZ strategists wrote in a daily note. Australia's Woodside Petroleum slid 2 percent. Dow and S&P 500 futures were both up 0.1 percent after being lower earlier.

Emerging market stocks lost 0.24 percent. Markets in Japan and South Korea were closed for holidays.

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In the United States, meanwhile, job growth rebounded sharply in April and the unemployment rate dropped to 4.4 percent, near a 10-year low, according to government data. Prices are down 5.4% this week, heading for a third weekly decline.

"But if you add a slowdown in China", she said, "it becomes a demand story".

Brent futures were up US$1.20, or 2.5 per cent, at US$49.58 a barrel by 11:02 a.m. EDT, while US West Texas Intermediate crude was up US$1.09, or 2.4 per cent, at US$46.61 per barrel.

"We feel that the (OPEC) cartel has come to a fork in the road in which the current agreement will be abandoned or steps will need to be taken to double down on current efforts by increasing production curtailments".

KEEPING SCORE: In Europe, France's CAC 40 was up 0.2 percent at 5,385 as investors remained hopeful that the centrist presidential candidate would win in Sunday's election. US inventories fell less than all 11 forecasts by analysts surveyed by Bloomberg.

The U.S. dollar hit its lowest level in roughly six months against the euro at $1.0999. The euro meanwhile touched six-months highs of nearly $1.10 ahead of France's weekend election, in which polls now expect centrist Emmanuel Macron to convincingly beat right-wing and anti-euro rival Marine Le Pen. Taiwan's benchmark fell and Southeast Asian indexes were mixed.

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