Analysts first noticed the supply constraint last week when data revealed the closure of 26 US oil rigs.
Brent climbed 17 cents to $48.30 a barrel by 0136 GMT after it finished up 44 cents, or almost 1 percent, on Friday. Russia, the world’s top oil producer, has been unwilling to cut output to support crude prices and last November it even refused to cooperate with the Organization of the Petroleum Exporting Countries (OPEC) in order to defend its market share. The discount for the Medium grade to Asia, the main market for Saudi crude, widened by the most since the state-owned company made a $2 a barrel cut in February 2012, according to data compiled by Bloomberg.
Abdalla el-Badri, the secretary-general of the Organisation of Petroleum Exporting Countries (OPEC), has stated that the decline in global crude oil prices may not abate until 2017, as the oil market is expected to rebalance within two years.
In addition, he told reporters that a meeting between officials from Russian Federation and Saudi Arabia was being planned for the end of the month to discuss energy issues and other projects.
Reports that producer Russian Federation was willing to discuss the global supply glut situation that has been weighing on the market also supported prices.
Global oil prices weakened on Tuesday, weighed down by abundant supplies that have plagued the market for months.
Crude rebounded, with Brent futures rising above $50 a barrel, amid upbeat comments from senior executives at an oil-industry conference in London. USA crude stockpiles remain about 100 million barrels above the five-year average, while OPEC continues to pump above its collective quota. “It remains uncertain how fast prices will recover and where they will settle”, Ben van Beurden said at the Oil & Money conference in London.
Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, the EIA said in its Short-Term Energy Outlook.
Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, concurred, saying: “Steeper US production declines over the near term have created a bid for oil prices”.
The USA benchmark, West Texas Intermediate crude, rose $1.07, or 2.3 percent higher at $47.33 a barrel. The European benchmark crude was at a premium of $3.11 to WTI.
Then on Tuesday, the U.S. Energy Information Administration disclosed a forecasting showing that US oil production will fall in the second half of next year.