Oil prices steady near two-year high as supply cuts bite

An Indian Oil tanker driver waits outside a fuel depot in Mumbai. Image Source: Reuters

Oil prices were steady to slightly firmer on Tuesday after a week of gains as the prospect of increasing U.S. exports dampened bullish sentiment that has driven Brent crude to more than two-year highs above $60 per barrel.

Brent was up 28 cents or 0.5 percent at $61.18 a barrel by 12:20 p.m. EDT (1620 GMT), close to its July 2015 highs reached earlier this week, and up around 37 percent from its 2017 lows hit in June.

U.S. West Texas Intermediate crude (WTI) was 7 cents or 0.1 percent higher at $54.21, still near its highest since February and close to its highest for more than two years.

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Traders and brokers said investors were adjusting positions after price rises of around 5 percent in October.

For the month, Brent was up 6.3 percent, while WTI was on track for a 4.9 percent gain. WTI`s discount to Brent has widened to nearly $7, making it attractive to exporters.

"The large differential has opened the door on regional arbitrage, driving a spike in U.S. crude exports over recent weeks," BMI Research said in a note.

U.S. crude exports have jumped close to 2 million bpd and production has risen almost 13 percent since mid-2016 to 9.5 million bpd.

"The problem is as soon as prices move up it`s too easy for U.S. producers to add another rig or another completion crew," said Stewart Glickman, energy equity analyst at CFRA Research in New York, "Then they increase production and you’re back where you started."

Market watchers are looking ahead to weekly energy data from the American Petroleum Institute at 4:30 p.m. EDT (2030 GMT) on Tuesday and from the government at 10:30 a.m. on Wednesday.

Six analysts polled ahead of inventory reports estimated, on average, that crude stocks were forecast to have fallen 2.6 million barrels in the week ended Oct. 27.

Iraq`s move to increase oil exports from its southern ports by 220,000 barrels per day (bpd) to 3.45 million bpd to make up for supply disruptions from its northern Kirkuk fields also weighed on prices, traders said.

Bullish sentiment has been fuelled by a pledge by the Organization of the Petroleum Exporting Countries, Russia and other exporters to hold back about 1.8 million bpd in oil production to tighten markets.

OPEC`s adherence to its pledged supply curbs rose to 92 percent from September`s 86 percent, a Reuters survey showed, as top exporter Saudi Arabia continued to pump below its OPEC target and output in Venezuela, in economic depression, declined further.

OPEC oil output fell this month by 80,000 bpd, as exports from northern Iraq dropped and other producers maintained adherence to the supply cut deal.

OPEC is scheduled to next meet at its headquarters in Vienna on Nov. 30.

(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)

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