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Oil prices rise as OPEC compliance offsets robust US output

Atheer – External Sources

US oil prices extended modest gains on Thursday, as OPEC’s strong compliance with a supply reduction pact offset news that US production had topped ten million barrels per day for the first time in nearly half a century.

According to Reuters, NYMEX crude for March delivery rose 14 cents (0.2 percent), to $64.87 per barrel by 0558 GMT, after ending the last session up 0.4 percent. London Brent crude for April delivery was up 15 cents (0.2 percent), at $69.04, after settling up three cents in the previous session.

US crude oil production in November surpassed ten million barrels per day for the first time since 1970 and neared the all-time output record, the Energy Information Administration said on Wednesday.

“As oil prices rise, higher shale output is definitely on the market’s mind,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.
OPEC’s Oil output also rose in January from an eight-month low, as higher output from Nigeria and Saudi Arabia offset a further decline in Venezuela and strong compliance with a supply reduction pact.
However, adherence by producers included in the deal to curb supply rose to 138 percent from 137 percent in December, suggesting that commitment isn’t wavering even as oil prices hit their highest level since 2014.
“OPEC nations realise that lower production would buoy oil prices and that it’s better for them,” Akuta added.
Oil prices are unlikely to advance much above $70 per barrel over the course of this year, with the market caught between the opposing forces of OPEC-led production cuts and surging US output.
Oil prices initially slipped on Wednesday after US Energy Information Administration data showed that US crude inventories rose by 6.8 million barrels last week, after ten straight weeks of declines. Prices however rebounded on the back of a surprise two million-barrel drawdown in gasoline stocks, helping push up gasoline futures.
Distillate stockpiles, which include diesel and heating oil, fell by 1.9 million barrels, versus expectations for a 1.5 million-barrel drop.
Kuwait Petroleum Corp expects to spend over $500 billion as it boosts its crude oil production capacity to 4.75 million barrels per day in 2040, the national oil firm said on Wednesday.

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