Crude settles higher after Iraq and Algeria lift hopes for further cuts

Crude futures settled higher on Thursday, as investor sentiment remained positive amid a large drawdown in U.S. crude stockpiles while hopes for an extension of the OPEC-led deal received a boost.

On the New York Mercantile Exchange crude futures for June delivery gained 1.1% to settle at $47.83 a barrel, while on London’s Intercontinental Exchange, Brent added 1.04% to trade at $50.74 a barrel.

Crude prices settled just shy of $48, as investors continued to cheer the EIA’s bullish inventories report released on Wednesday.

For the week ended May 3, the EIA said that crude oil inventories fell by 5.25 million barrels, which confounded expectations of a draw of 1.79 million barrels.

Meanwhile, Algeria and Iraq lifted hopes that the OPEC-led supply-cut agreement would be extended beyond June, after both nations said they would support a deal extension.

In November last year, OPEC and other producers, including Russia, agreed to cut output by about 1.8 million barrels per day (bpd). The deal to cut production began in January this year, for a period of six-months until June.

OPEC is expected to decide at talks on May 25 whether to extend the current deal to cut production for an additional six-months to the end of the year.

In its monthly report on Thursday, OPEC announced that group production fell in April, and projected non-OPEC production this year to grow by 950,000 barrels per day (bpd).

Total non-OPEC growth rose to 580,000 barrels in April; U.S. production accounted for the bulk of non-OPEC growth around 540,000 barrels, or 93%.

Crude prices have rallied more than 4% over the past two-sessions, however, overall sentiment remains bearish as the EIA raised its U.S. oil production forecast and lowered projection for average oil prices in 2017.

Meanwhile, market participants turned attention to Baker Hughes rig count, due to be released on Friday at 13:00 EDT.