on Thursday, driven up by a weakening dollar, though gains were capped
by plentiful supplies and bulging inventories despite efforts by OPEC
and other producers to cut output to prop up the market.
Benchmark Brent crude was up 35 cents a barrel at $55.43 by 1125 GMT. U.S. light crude futures were up 20 cents at $52.95.
Traders attributed the gains largely to a
weakening dollar, which has lost 3.9 percent in value since peaking in
January. Oil is traded in the U.S. currency and a weaker dollar makes
fuel purchases less costly for countries using other currencies,
potentially spurring demand.
However, oil prices were capped by data from the
U.S. Energy Information Administration (EIA) showing an increase of
2.84 million barrels last week in U.S. crude inventories to 488.3
million barrels, pointing to ample supply in the world’s biggest market.
U.S. oil production has risen by 6.3 percent since the middle of last year to 8.96 million barrels per day (bpd).
“Crude oil and other liquids
inventories grew by 2 million bpd in the fourth quarter of 2016, driven
by an increase in production and a significant, but seasonal, drop in
consumption,” the agency said.
Rising
U.S. output and inventories are likely to limit the impact of the
agreement by the Organization of the Petroleum Exporting Countries and
other producers, including Russia, to cut supplies in an effort to
reduce a global glut.
OPEC
and other exporters have said they will reduce output by almost 1.8
million bpd during the first half of 2017. Industry data suggest many of
those cuts have already been made.
But key customers in Asia are being spared any significant cuts because producers fear losing market share to competitors.
Saudi crude supplies to Japan will not be reduced, a senior Saudi official said on Thursday.
The two benchmark crudes have stayed within fairly narrow trading ranges since OPEC agreed to limit production.
“Oil prices have hardly budged at
all for several days now,” said Carsten Fritsch, senior commodities
analyst at Commerzbank in Frankfurt. “Brent appears stuck at between $55
and $56 per barrel, while WTI is hovering around the $53 per barrel
mark.”
Fritsch argues the current range is unlikely to last if U.S. oil production keep rising:
“We
still believe there are more arguments in favor of prices breaking out
of their current corridor and embarking on a downward trajectory.”
