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Oil steady as rising US output offsets record bullish bets
[NEW YORK] Oil prices ended little changed on Monday as the prospect for US crude production to continue growing offset reports of high compliance to the Opec production cut agreement and record bullish bets that prices would rise further.
On its penultimate day as the front-month contract, Brent futures for April delivery lost six cents, or 0.1 per cent, to settle at US$55.93 a barrel, while US West Texas Intermediate crude (WTI) gained six US cents, or 0.1 per cent, to US$54.05.
Investors raised their bets on rising Brent crude oil prices to a new high last week, breaking the 500,000-lot mark for the first time on record, data from the InterContinental Exchange showed.
Money managers also raised their bullish US crude futures and options positions in the week to Feb 21 to the highest on record, the US Commodity Futures Trading Commission (CFTC) said on Friday.
Investors now hold 951,312 lots' worth of US and Brent crude futures and options, equivalent to nearly 1 billion barrels of oil valued at more than US$52 billion, based on current Brent and WTI benchmark prices.
"With speculators increasing their bullish bets on US crude to an all-time high, the risk of disappointment and subsequent downward spiral in prices has never been greater," oil brokerage PVM's Stephen Brennock said.
Among the risks is the level of compliance to the deal between the Organization of the Petroleum Exporting Countries (Opec) and other producers to bring down oil output by about 1.8 million barrels per day (bpd).
Opec's record compliance with the deal has surprised the market, and the biggest laggards, the United Arab Emirates and Iraq, have pledged to catch up with their targets.
The International Energy Agency put Opec's average compliance at a record 90 per cent in January. Based on a Reuters average of production surveys, compliance stands at 88 per cent.
A Reuters survey of Opec production later this week will show compliance for February.
Iran, Libya and Nigeria, meanwhile, will remain exempted from the production cuts for the first six months of 2017, Opec's Secretary General said.
"With bullish speculation already at a record high... a couple things you have to be concerned about if you are a bull are the rebound in US oil production and growing output from Iran, Nigeria and Libya," said Kyle Cooper, a consultant for ION Energy in Houston.
US producers boosted crude production to over 9 million bpd during the week ended Feb 17 for the first time since April 2016 as energy firms search for more oil, according to federal data.
US drillers added five oil rigs in the week to Feb 24, bringing the total count up to 602, the most since Oct 2015, energy services firm Baker Hughes Inc said on Friday.