Crude oil edged higher on Tuesday, underpinned by high compliance with OPEC’s production cuts even as the market remains anchored by rising U.S. production.
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The Organization of the Petroleum Exporting Countries (OPEC) has so far surprised the market by showing record compliance with oil-output curbs, and could improve in coming months as the biggest laggards – the United Arab Emirates and Iraq – pledge to catch up quickly with their targets.
"With the prospect of OPEC extending the current cuts even longer, we would expect to see prices continue to push higher from here," ANZ said in a note.
The benchmark Brent crude oil added 0.2 percent to $56.03 a barrel by 0736 GMT, while West Texas Intermediate crude oil was little changed at $54.06 a barrel.
For the month, U.S. crude oil is up 2.4 percent after falling in January, while Brent oil has risen marginally.
Under the deal, OPEC agreed to curb output by about 1.2 million barrels per day (bpd) from Jan. 1, the first cut in eight years. Russia and 10 other non-OPEC producers agreed to cut around half as much.
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A Reuters survey of OPEC production later this week will show compliance for February.
Passive investment funds are poised to shift an estimated $2 billion from far-term to near-term crude futures over the next week, anticipating an energy market rally as the OPEC output cut slashes supply.
At the same time, rising U.S. oil production continues to limit gains.
"Talking about more OPEC cuts, they can’t have too much higher cuts as it will lead to more U.S. shale oil coming into the market," said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.
U.S. producers boosted crude production to over 9 million bpd during the week ended Feb. 17 for the first time since April 2016 as energy firms search for more oil, according to federal data.
U.S. drillers added five oil rigs in the week to Feb. 24, bringing the total count up to 602, the most since October 2015, energy services firm Baker Hughes Inc said on Friday.
A bearish target at $53.37 per barrel has been aborted for U.S. oil, as it seems to have stabilized around a support at $53.99, said Wang Tao, Reuters market analyst for commodities and energy technicals.
Brent oil looks neutral in a range of $55.93-$57.26 per barrel, and an escape could suggest a direction.
(Reporting by Naveen Thukral; Editing by Richard Pullin and Biju Dwarakanath)
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