Oil edges off three-month lows, eyes on USA inventory

Kristopher Drake
March 17, 2017

"It will speed up rebalancing of the market and will help bring prices to acceptable levels for oil-producing nations and the industry in general", he said.

As for the OPEC production cuts, the IEA notes that the compliance rate has averaged 98%, but that figure is "very heavily influenced" by Saudi Arabia's 135% compliance rate.

"Despite the supply adjustment, stocks have continued to rise, not just in the US, but also in Europe", OPEC said.

Combined with an increasing amount of new oil production in the U.S, this has made it much harder for OPEC to manipulate the price of oil.

The IEA said that Saudi Arabia was shouldering the bulk of the cuts in overall OPEC production and while it actually increased output by 180,000 bpd to 9.98 million bpd in February, it kept below the agreed limit of 10.06 million bpd.

The latter were in excess of the 10.058m it was bound to under a November deal with other producers to slash their combined levels of production.

US West Texas Intermediate (WTI) crude was trading up 70c, or 1.5%, at $48.42 a barrel by 12.36am GMT, having earlier risen more than $1 to $48.87.

Elsewhere, Brent oil for May delivery on the ICE Futures Exchange in London dipped 11 cents to $51.70 a barrel.

The Organization of the Petroleum Exporting Countries is curbing its output by about 1.2 million barrels per day (bpd) from January 1, the first reduction in eight years.

Bloomberg reports that United States crude stockpiles increased by nearly three million barrels in one week. Iran has allowances for production gains as it seeks to retake a market share lost to sanctions and secondary sources reporting an increase from January of 36,100 barrels per day to 3.8 million barrels per day.

In the USA, higher oil prices triggered by the OPEC agreement have spurred investment in the shale industry, potentially signally another production boom that could undermine OPEC's goal of rebalancing the market.

The US Energy Information Agency reported that US inventory decreased by 237,000 barrels against the prediction of another rise in stocks. They got an added boost just before that session ended as the USA dollar weakened in the wake of the Federal Reserve's decision to lift its benchmark interest rate (http://www.marketwatch.com/story/fed-raises-interest-rates-by-a-quarter-point-sees-two-move-moves-this-year-2017-03-15) by 25 basis points, as expected.

We could see prices firm if OPEC announces it is considering an extension.

In the report, OPEC pointed out that there is an increase in members' compliance with the deal.

Other reports by Ligue1talk

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