Oil up 2 pct as OPEC chief sees higher compliance with cuts

This was after Opec’s Secretary General, Mohammed Barkindo, commented that despite a 90% compliance rate for production cuts to output, more measures may be needed to curb a supply glut that has so far shown no signs of receeding.

Oil prices have been steady at around the $55 level most energy professionals expected would be the average for the year at the start of 2017.

On Monday, Brent crude was trading at $56.18 per barrel, while the U.S. benchmark West Texas Intermediate rose to $53.69.

“At the crux of the matter is that 90% Opec compliance is being balanced by ever-increasing U.S. shale production”, he added.

The “outstripping” quotes in the Bloomberg system suggest for today that WTI prices will be at $53.70 and Brent quotes $56.21 a barrel. Traders remain concerned as to whether the USA increase in drilling rigs would undermine OPEC’s commitment to cut production, which is now standing at a 90 percent compliance rate.

The official also announced that the country’s Sixth National Development Plan (2016-2021) has envisaged daily oil production of 4.7 million barrels. Despite investors’ bullishness over the potential growth in prices amid production cuts, the market fundamentals for oil prices appear muted considering the threat of rising US production.

Analysts said widening of positions by participants driven by pick up in demand in the spot market against tight stocks position on restricted supplies from producing regions mainly kept crude palm oil prices higher at futures trade.

Russian Federation is preparing to cut output by 300,000 bpd during the first half of 2017 as a part of a global pact. Barkindo said the nation has pledged to keep cutting.

Mr Barkindo said: “Because of the level of commitment and enthusiasm to ensure that we achieve our objective of bringing this…” There is no evidence that they are chasing the market higher. However, critics have questioned how long the compliance will last.

Hedge funds hold more than 9.5 long positions for every 1 short position in Brent and WTI combined, the highest ratio since May 2014 (tmsnrt.rs/2ldKiTX).

Bank of America Merrill Lynch cut its forecast for Brent crude prices to an average of $50-70 through 2022, from $55-$75 amid a recovery in USA shale production.

“I am anticipating both oil contracts to break out of their recent ranges and head higher”.