Global oil prices were broadly flat on Tuesday, continuing to trade in a tight range with OPEC’s bullish production cuts offset by increasing crude production from the United States.
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The Organization of the Petroleum Exporting Countries 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.
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.
In addition, 11 non-OPEC oil producers have promised to cut their output – Russia reduced production by 124,000 barrels per day this month compared with October levels, Interfax reported on Tuesday citing a source familiar with the data.
Benchmarks Brent and West Texas Intermediate crude oil were trading several cents on either side of the previous day’s close. By 0930 GMT, Brent was 3 cents higher at $55.96 a barrel while the U.S. benchmark was 3 cents lower at 54.02.
Investors raised their bets on rising Brent and WTI crude oil prices to fresh highs, data from the InterContinental Exchange and the U.S. Commodity Futures Trading Commission (CFTC) showed in recent days.
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Meanwhile, passive investment funds were poised to shift an estimated $2 billion from far-term to near-term crude futures over the next week; another sign that market players are expecting a rally.
But while prices have risen around $10 a barrel since a low in November before the final OPEC deal was struck, they have been trading in a narrow range so far this year, said analysts at PVM.
"The oil market has been moving sideways for the last two months and has been stuck in a range of about $5 a barrel. This is even more pronounced in the past 6 weeks, during which this range has narrowed down to $3/bbl basis Brent," PVM wrote.
"The guessing game is in full swing as which direction oil prices will break out of their current range. It is fair to say the voice of those who are expecting higher prices in the coming months is louder than that of their rivals," PVM said, but warning that "if current longs decide to run for the exit there will only be one way for oil prices to go."
Oil industry and OPEC country sources told Reuters Saudi Arabia wanted crude prices to rise to $60 a barrel this year, a level it saw as encouraging investments but not spurring a fresh surge in U.S. shale production.
But a report from consultancy Rystad Energy issued earlier this month said the break-even price for U.S. shale oil producers fell last year to an average $35 per barrel.
U.S. producers boosted crude production to over 9 million bpd during the week ended Feb. 17 for the first time since April 2016, 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 said on Friday.
(Additional reporting by Naveen Thukral in Singapore, editing by Louise Heavens)
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