The deal has helped push prices higher in the first few months of the year, but its magic appears to be fading because of higher oil production by the U.S. Benchmark Brent crude settled up 7 cents at $50.84 on Friday and USA light crude was up 1 cent at $47.84.
"But now with rising demand and a commitment by Russian Federation and Saudi Arabia to extend cuts, we could see the recent 5 week drop in USA oil inventories continue for the foreseeable future", he wrote in his daily Energy Report newsletter.
The total active USA rig count, which includes oil and natural-gas rigs, rose 8 to 885, according to Baker Hughes.
While output curbs that started January 1 are working, global inventories aren't yet at the level targeted by OPEC and its allies, Saudi Energy Minister Khalid Al-Falih said in Beijing alongside his Russian counterpart, Alexander Novak.
"The agreement needs to be extended as we will not reach the desired inventory level by end of June".
Neil Atkinson, the IEA's head of oil analysis said in London last week that the current agreement by more than 20 major oil producers has succeeded in making a dent in the global supply glut that has kept prices under pressure in recent years. But with this news of extension of the production cut deal along with the news that the oil inventory has begun to fall drastically over the last few weeks, it has led the recovery in the oil prices and we could see the prices threatening the important psychological mark of $50 pretty soon.
Opec, and the non-member countries such as Russian Federation that are co-operating with the group, face a dilemma.
There were also worries over rising U.S. production after 16 weeks of rising drilling activity since oil prices rebounded above $50.
The cut hasn't really worked. Longs, which had already slumped to pre-Opec deal levels a week earlier, edged up 2.1 percent.
USA producers still need to remove obstacles to exporting crude to new markets in Asia, said JBC analysts in a recent report.
However, despite U.S. production continuing to rise, a big draw on U.S. reserves last week put trading back on the front foot, boosted by this weekend's news.
In his statement last week, Novak said that oil and product draws in the OECD "will only be accelerating from here", citing the drop in floating storage barrels.
Further defining the 2018 battleground is the U.S. Energy Information Administration, which calculates that American crude production will surpass 10 million bpd by late next year, exceeding the record high set in 1970; this will propel non-OPEC output up 1.3 million bpd in 2018 and fill up nearly all the expected growth in demand.
EOG Resources (EOG) said it could increase production by 18% while operating within cash flow if oil averages $47 per barrel this year. Saudi Arabia, OPEC's de facto leader, has said it expects an extension to the end of 2017 or possibly beyond.