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Oil to average $50 per barrel in 2018

Oil to average $50 per barrel in 2018”

Traders and investors will be on the lookout later on Tuesday for trade group American Petroleum Institute's weekly sampling of crude stockpiles ahead of official data due from the USA government on Wednesday.

If OPEC doesn't extend the supply curbs beyond their current expiry at the end of March, the market will return to oversupply again, forecasts from the International Energy Agency indicate.

Expectation that the Organization of the Petroleum Exporting Countries (OPEC) will extend its output reduction initiative beyond its March 2018 expiry date, along with US president Donald Trump getting tough with Iran in a United Nations address this week, caused crude on Wednesday to finish at a four month high.

OPEC members call for further output cuts to balance the market
OPEC members call for further output cuts to balance the market

Brent for November settlement lost 27 cents to $56.02 a barrel on the London-based ICE Futures Europe exchange, after advancing $1.15 on Wednesday.

USA crude futures dipped 14 cents, or 0.3 percent, to settle at $50.55 a barrel.

OPEC and 10 producers outside the cartel, including Russian Federation, agreed late past year to cap production at around 1.8 million barrels a day lower than peak October 2016 levels; part of an effort to alleviate the global oil glut and boost prices.

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Benign inventory growth seen for USA crude stocks last week - despite larger builds feared initially from refinery closures related to Hurricane Harvey - also underpinned prices. USA crude oil inventories rose for the third straight week. Its production was 32.6 million barrels a day in June.

XAutoplay: On | OffIraqi Oil Minister Jabbar al-Luaibi said Iraq and Ecuador think there should be another 1% cut in production and hinted that others want the cut extended. It rebounded to 9.35 million barrels per day in the prior week, but was still below the 9.53 million bpd rate before Harvey hit.

Gasoline stockpiles were down 2.1 million barrels for the week, while distillate stockpiles fell 5.7 million barrels, according to the EIA. Ahead of that, will be API's closely-watched inventory sampling at 4:30 p.m. on Tuesday.

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Traders stated that the US Dollar also strengthened, further adding pressure on the oil prices. The profitability line in shale oil production in U.S. reduced to $45-50 a barrel in recent days, while it was $60 in previous years.

Conversely, due to demand, Nolting says prices won't fall dramatically either: "So I think it's quite stable in the oil sector".

However, U.S. crude remains rangebound around $50.

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