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Oil prices rise further as U.S. inventories grow less than expected

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Oil prices rise as OPEC, allies agree deal to cut output by 10m barrels/day

Oil prices climbed up further on Thursday as U.S. inventories increased less than expected. Analysts however predicted that additional gains might be limited by the current glut in the market as the COVID-19 pandemic crushes fuel demand.

As of 01:44 West African Time, U.S. West Texas Intermediate (WTI) had appreciated by 0.8% or 19 cents, rising to $24.18 a barrel. It declined by over 2% in the previous session.

Brent, the benchmark for Nigeria’s crude grades, gained 0.4% or 12 cents, trading at $29.84 per barrel after dropping earlier in the Asian session and dipping by 4% on Wednesday.

Bonny Light, Nigeria’s premium oil grade, traded at $22.63 per barrel on Wednesday, down by 2.62% or 61 cents according to oilprice.com.

“The latest report (on U.S. inventories) added to tentative evidence that – after a catastrophic few weeks – the pressure on the U.S. oil market is beginning to lessen.

Read also: NSE: Market maintains rising profile as buy pressure persists

“That said, we wouldn’t rule out more turbulence in the coming weeks,” said Capital Economics in a note.

While prices have risen steeply since late April as a number of countries have begun to ease coronavirus lockdowns, oil continues to be pumped into storage, leaving a wide gap between demand and supply.

Energy Information Administration stated on Wednesday that U.S. crude inventories had risen for the 15th consecutive week last week, increasing by 4.6 million barrels.

It was less than what experts had projected in a poll organised by Reuters, which suggested a 7.8 million-barrel rise even though the gain underscored how much supply is being stored.

Iraq, the Organisation of Petroleum Exporting Countries’ (OPEC) second largest producer, has not yet told customers of imminent restrictions on its oil exports.

This implies that it is finding it hard to fully comply with a deal between OPEC and other producers like Russia to reduce production by a record amount.

OPEC and its allies agreed to cut output from 1st May by about 10 million barrels to steady prices amidst the fall in demand in economies ravaged by the coronavirus outbreak.

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