While global oil prices on Friday finished solidly after the International Energy Agency (IEA) lifted its forecast for global-oil demand this year and claimed there had been strong compliance with OPEC’s pledge to cut output, there was a certain amount of wariness among traders.
That hesitancy saw prices barely register a gain for the week, as they continued to be pressured by expectations for further growth in US crude production in coming months. In fact Friday’s near 2% jump in prices helped make up for the negativity from the fears about rising US oil output.
In fact figures out last week showed production rising in the US, along with yet another the number of rigs being used to drill for oil which is now at a three year high. Data from Baker Hughes Friday further fuelled those fears revealing that the number of rigs drilling for oil in the US rose by 8 to 591 rigs last week.
That was the fourth weekly increase in a row. The total active US rig count, which includes oil and natural-gas rigs, also rose by 12 to 741, up 200, or 37% in the past year.
But it was the IEA report which in the end prevailed and saw prices for the March West Texas Intermediate crude contract rise 86 cents, or 1.6%, to settle at $US53.86 a barrel in New York.
But for the week, prices were up just 3 cents over the week, thanks to those continuing concerns about US output growth.
In London April Brent crude on added $US1.07, or 1.9%, to $US56.70 a barrel, cutting it’s weekly loss to just 0.2%. Adding to the pressure was the realisation that US oil production will regain the 9 million barrels a day level, possibly in the next few days. But In the most recent week (ending February 3) production rose to 8.98 million barrels a day, the highest level since April.
Analysts say there is a correlation between rising crude output and the increasing use of drilling rigs.
But the immediate influence was the news that the International Energy Agency (IEA) reckons OPEC members are complying with the production cap agreement.
The IEA said OPEC members have reached a record compliance of 90% with their agreed output cuts.
OPEC agreed November 30 agreed to cut its production from January by 1.2 million barrels a day (b/d) to end a persistent oil glut.
Russia and other producers outside the group committed to take 558,000 b/d out of the market – but not the US.
In its closely watched monthly report, the IEA said on Friday that OPEC production fell by 1 million b/d to 32.06 million b/d in January compared with the previous month.
This “first cut is certainly one of the deepest in the history of OPEC output cut initiatives,” the IEA said. OPEC data will be issued this week.
The IEA said OPEC members bound by the agreement (it excludes Indonesia, Libya and Nigeria, for instance) reached 90% of their commitments, and if if the January level of compliance is maintained, this would lead to cut of 600,000 b/d. The rest would be made up from cuts by non members such as Russia.
Production in Russia fell by 100,000 b/d a day, one-third of its committed cuts. Overall global oil supplies plunged nearly 1.5 million b/d in January, the IEA said.
In Africa, the IEA said production from Nigeria and Libya grew a combined 200,000 barrels a day in January.
