Oil prices were steady on Tuesday as news of lower production by the Organization of the Petroleum Exporting Countries (OPEC) and other key exporters was balanced by reports of more drilling and higher output in the US.
Benchmark Brent crude was down 5 cents at $55.18 a barrel by 1150 GMT, while US light crude rose 5 cents to $52.80.
Ministers from OPEC and big producers outside the group said on Sunday that of the almost 1.8 million barrels per day (bpd) they had agreed to remove from the market starting on Jan. 1, 1.5 million bpd had already been cut.
Ministers were engaged in a campaign of “bullish rhetoric,” talking up their deal to make sure the market responds positively, said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.
“Call it a charm offensive or determination to succeed,” Varga said. “One thing is certain: The level and the depth of cooperation between OPEC and non-OPEC producers is unprecedented.”
Bernstein Energy said global oil inventories declined by 24 million barrels to 5.7 billion barrels in the fourth quarter of last year from the previous quarter. This amounts to about 60 days of world oil consumption.
“This is the biggest quarterly decline since the fourth quarter of 2013, confirming that inventory builds are now reversing as the market shifts from oversupply to undersupply,” Bernstein analysts said in a note to clients.
Iraq’s oil minister said on Monday that most major oil companies working in its territory were participating in output reductions agreed as part of the OPEC deal.
But the reduction in supply by OPEC is being offset by an increase in US production as prices rise.
US drillers added the most rigs in nearly four years, data from energy services company Baker Hughes showed on Friday, extending an eight-month drilling recovery.
US oil production has risen by more than 6 percent since mid-2016, though it remains 7 percent below the 2015 peak. It is back to levels reached in late 2014, when strong US crude output contributed to a crash in oil prices.
“The rising oil supply from the US in coming months is likely to preclude any further increase in oil prices,” said Commerzbank analyst Carsten Fritsch.
“In view of the record-high optimism exhibited by speculative financial investors, we see a risk of falling prices.”

Source; Arab News