FILE PHOTO: A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran July 25, 2005. REUTERS/Raheb Homavandi/File Photo
LONDON: Oil prices rose on Tuesday after news Opec oil production has fallen sharply this month, pointing to a strong start by the exporter group in implementing its first supply cut deal in eight years.
A Reuters survey showed on Tuesday crude oil supply from the 11 Opec members with production targets averaged 30.01 million barrels per day (bpd) in January, versus 31.17 million in December.
Overall, the Organisation of the Petroleum Exporting Countries achieved 82% compliance with its promised production cuts, well above most market forecasts.
Compliance comfortably exceeds the initial 60% achieved when a similar deal was implemented in 2009, and the survey adds to indications that adherence so far has been high.
“This is very high, a good number,” an Opec source said of the January compliance estimate.
Brent crude oil was up 50 cents a barrel at US$55.73 by 1455 GMT. US light crude was up 60 cents at US$53.23.
Both benchmarks have traded within fairly narrow ranges over the last two months, since Opec and other big exporters agreed to cut output by almost 1.8 million bpd in an attempt to clear a global glut.
After an initial price rise on hopes that markets would rebalance quickly, Brent and US crude futures have both been held back by evidence of higher US oil drilling and forecasts of a rebound in shale production.
US shale output is slowly increasing, helping keep a lid on prices. Brent has been close to US$55 a barrel and US crude not far from US$52.50 for most of January.
“Opec adherence to production targets has been strong,” said US investment bank Jefferies, but added that US drilling “activity levels are already picking up”.
Following months of increased drilling, US oil production has risen by 6.3% since July last year to almost 9 million bpd, according to data from the US Energy Information Administration.
Goldman Sachs estimates that year-on-year US oil “production will rise by 290,000 bpd in 2017” if a backlog on rigs that are still to become operational is accounted for.
The differing outlook between global oil markets and the US market has focused attention on the spread between Brent and US crude oil futures, also known as West Texas Intermediate or WTI. - Reuters
