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Crude Oil Prices Supported by Inventory Draw and Russia’s Pledge to Fully Comply with Output Cut

Crude oil prices climbed higher for the second consecutive day as a report showing unexpected expected decline in US inventory. Meanwhile, Russia pledged that it would fully comply with the output cut deal this month. However, caution is advised over the promise as Russian oil output has reached the highest level in 11 months in March. Currently trading at US$62.29/bbl, the front-month WTI contract ended that at US$63.51/bbl, up +0.79% on Tuesday. Meanwhile, the Brent contract gained +0.71% and settled at US$62.12/bbl for the day.

The industry-sponsored API estimated that crude oil inventory fell -3.28 mmb in the week ended March 30. For refined oil products, gasoline and distillate stockpile rose +1.12 and +2.2 mmb respectively. the official report from the US Energy Department (EIA) might report a +0.25 mmb increase in crude oil inventory. However, gasoline and distillate stockpiles probably dropped -1.26 mmb and -1.13 mmb last week.

Russian energy minister Alexander Novak told Prime news agency that the country would fully comply with its commitment to cut oil output under the OPEC/non-OPEC deal this month. He added that the country is meeting the agreement “in full” in “the first days of April”, signaling the commitment to “implement our agreements until our goals are reached”.

Under the agreement, Russia should lower its production, by -0.3M bpd, from October 2016’s 11.247M bpd, to about 10.947M bpd. However, the oil giant’s output reached 10.969M bpd in March, the highest in 11 months and up from February’s 10.95M bpd.

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