Oil edged up on Monday, as investor optimism over the effectiveness of producer cuts encouraged record bets on a sustained price rise, although growing US output and stubbornly high stockpiles kept price gains in check.
Brent futures were up 28 cents at $56.09 a barrel at 1448 GMT, while US West Texas Intermediate crude was up 23 cents at $53.63.
Investors have certainly taken the Organization of the Petroleum Exporting Countries (OPEC) members at their word on their commitment to cut production and now hold more crude futures and options than at any time on record.
But evidence of rising output in the US has tempered money managers’ appetite to push prices higher. Since the start of the month oil prices have gained around $2.
“There is still a general consensus that the OPEC/non-OPEC agreement helps supply to get in line with demand. This bullish stance is countered by the ever-increasing inventories in the US and rising rig counts,” PVM Oil Associates strategist Tamas Varga said in a note.
OPEC and other producers, including Russia, agreed last year to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017.
Estimates indicate compliance with the cuts is around 90 percent, while Reuters reported last week that OPEC could extend the pact or apply deeper cuts from July if global crude inventories fail to drop enough.
Saudi Arabia’s crude oil shipments fell in December to 8.014 million bpd from 8.258 million bpd in November, official data showed on Monday.
“Sustained gains above $55 a barrel and a hoped-for rally to $60 a barrel, (are) both proving incredibly tough nuts to crack,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
“At the crux of the matter is that 90 percent OPEC compliance is being balanced by ever-increasing US shale production,” he added.
US energy companies added oil rigs for a fifth consecutive week, Baker Hughes said on Friday, extending a nine-month recovery with producers encouraged by higher prices, which have largely traded above $50 a barrel since late November.
“Assuming the US oil rig count stays at the current level, we estimate US oil production would increase by 405,000 (barrels per day, or bpd) between fourth quarter 2017 and fourth quarter 2016 across the Permian, Eagle Ford, Bakken and Niobrara shale plays,” Goldman Sachs said in a research note.
The US market will be closed on Monday for the Presidents Day holiday.
Source: Arab News
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