Oil up as OPEC, Russia cuts outweigh output elsewhere

[May 02, 2017]  By Christopher Johnson

LONDON (Reuters) - Oil prices rose on Tuesday on news of lower Russian production and expectations that major OPEC exporters would extend output cuts into the second half of the year.

Benchmark Brent crude oil  was up 50 cents at $52.02 a barrel by 1120 GMT (7.20 a.m. ET). The futures contract hit a one-month low of $50.45 last week after the restart of two Libyan oilfields. U.S. light crude was up 35 cents at $49.19.

The Organization of the Petroleum Exporting Countries and other producers including Russia have agreed to cut output by 1.8 million barrels per day (bpd) for the first half of 2017 to try to reduce a global glut.

Russian oil production fell slightly last month to 11.00 million bpd, almost hitting its output target under the deal with OPEC, Energy Ministry data showed on Tuesday.

OPEC and other producers plan to meet on May 25 and are widely expected to keep output limits for the rest of the year.

"The second half of the year looks brighter, provided OPEC remains at least as disciplined as during the first half of 2017," said Tamas Varga, analyst at London broker PVM.

BP Chief Financial Officer Brian Gilvary told Reuters on Tuesday that oil inventories would keep falling and prices would be supported above $50 if OPEC extended its output limits.

"If the OPEC cuts get rolled into the second half of the year, that will underpin oil prices," Gilvary said. "We are managing things around $50-$55 a barrel. That's probably the range we would expect for the rest of the year."

A worker walks past a pump jack on an oil field owned by the Bashneft company near Nikolo-Berezovka, Bashkortostan, Russia , January 28, 2015. REUTERS/Sergei Karpukhin/File Photo

But oil market sentiment is fragile and many investors are concerned by the slow pace of inventory drawdowns, with stockpiles still near record highs.

Libya's National Oil Company said on Monday production had risen above 760,000 bpd to its highest since December 2014, with plans to keep boosting production.

U.S. crude output is at its highest since August 2015, while the Syncrude Canada oil sands project has started shipping crude from its Mildred Lake upgrader again after cutting production due to a fire in March.

U.S. crude inventories are expected to mark a fourth straight week of declines from a record high hit at the end of March, but stocks are still seen about 10 percent above year-end levels, according to Reuters calculations.

The American Petroleum Institute will release inventory data at 4:30 p.m. EDT (2030 GMT) on Tuesday.

(Additional reporting by Osamu Tsukimori in Tokyo; editing by Dale Hudson and Jason Neely)

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