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U.S. crude stockpiles rose for seven straight weeks, as oil prices move up


Big News Network.com
1 Mar 2017

JEDDAH, Saudi Arabia - Oil prices moved up on Wednesday on the back of strict adherence to OPEC guidelines, following the organization's pledge to cut output, although evidence of increasing U.S. production capped some of the gains.

“With the prospect of OPEC extending the current cuts even longer, we would expect to see prices continue to push higher from here,” ANZ said in a note.

U.S. crude stockpiles have risen for seven straight weeks. 

Expectations for another weekly build, this time of 3.1 million barrels last week, has led to concerns that demand growth may not be sufficient to soak up the global crude oil glut.

May Brent crude futures increased 19 cents to $56.70 per barrel at 1222 GMT, while U.S. West Texas Intermediate (WTI) futures for April delivery rose 9 cents to $54.10.

Brent crude had fallen 0.2 percent in February, its most significant slide in the second month of the year in four years.

"There seems ... to be a consensus within OPEC that the optimal crude oil price is as near as possible to the upper line of our shale band price range ($40-60 a barrel) but not significantly above," Olivier Jakob, a strategist at consultant Petromatrix, said.

"OPEC will be happy with price stability in the upper half of our shale band (i.e. trying to keep prices in the $50-60 upper half) and above $60 a barrel, we will see more OPEC cheating as members do not want to see U.S. shale oil come back too strongly."

According to a Reuters survey, OPEC's compliance with oil curbs rose to 94 percent in February. 

Main exporter Saudi Arabia and its Gulf allies are hoping the curbs will help oil rise a bit further to around $60 to boost exporters' income and industry investment.

"If compliance is high by OPEC and non-OPEC, then I think prices will reach $60," said an OPEC delegate. 

"If it was higher it would be better, but $60 is fine."

Under the agreement reached late last year, OPEC agreed to curb output by some 1.2 million barrels per day (bpd) from January 1, 2017, the first cut in eight years. 

Russia and 10 other non-OPEC producers also agreed to cut approximately half as much of that output.

Meanwhile, Moody's maintained its medium-term price band of US$40-US$60 per barrel for both Brent and West Texas Intermediate (WTI) crude.

“Our medium-term expectations, extending through at least 2018, are the most relevant price considerations used to estimate financial performance and determine ratings for corporates and oil-exporting countries,” Moody’s Senior Vice President Terry Marshall said in a statement.

Also, on Wednesday, Nigeria's oil minister Emmanuel Ibe Kachikwu, in an interview with CNBC Africa, said OPEC countries must lower production costs to be more competitive while competing with shale producers.

Kachikwu said he was "impressed with the work OPEC has done" and "confident prices will hold" but added, "What is more fundamental is what OPEC countries can begin to do for themselves in term of costs, diversification.

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