Oil edges up, but major recovery unlikely

Oil prices edged up today, supported by a fall in Saudi exports to the United States, but overall markets remained under pressure on the back of a world market awash with fuel.

Benchmark Brent crude futures were at $50.69 per barrel at 0756 GMT, up 13 cents or 0.3 per cent from their last close.

US West Texas Intermediate (WTI) crude futures were up 18 cents, or 0.4 per cent, at $47.88 a barrel. Brent was heading for a weekly fall of about 2.1 per cent, while WTI was off about 1.9 per cent.

Traders said the increase came as Saudi Arabia said its crude exports to the United States would fall by around 300,000 barrels per day (bpd) between February and March.

In the United States, overseas oil suppliers like Saudi Arabia have to compete against rising shale drilling, which has pushed up US oil production by more than 8 per cent since mid-2016 to just above 9.1 million bpd.

To other major consumer regions, however, Saudi exports remain high despite an effort led by the Organization of the Petroleum Exporting Countries (OPEC), and supported by other producers including Russia, to cut output by 1.8 million bpd during the first half of the year.

Data in Thomson Reuters Eikon shows that OPEC shipments to Asia, the world's biggest and fastest-growing oil consuming region, were at 17.6 million bpd in March, up more than 5 per cent since January, when the cuts officially started, in a sign that OPEC is shielding its main customers from the supply reductions.

Unless OPEC extends the curbs beyond June or makes bigger cuts, traders say oil prices are at risk of falling further.

"OPEC's goal of drawing down inventories to normal levels is not going to be reached before their agreement expires on June 30," said US investment bank Jefferies in a note to clients.

Dennis Gartman, founder and editor of the daily commentary, The Gartman Letter, said the longer term outlook was for ongoing low oil prices.

"This slump is very real ... fracking has only just begun in the US and it will be transferred swiftly to other countries abroad, so the supply of crude oil is going to increase rather dramatically in the years to come," he told the Reuters Global Markets Forum today.

Despite the OPEC-led cuts that began in January, Brent has fallen by over 13 per cent from its 2017 highs in early January as other producers have stepped up and filled the gap.