Oil steady as rising U.S. output undermines OPEC cuts

Markets Reuters

The Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas. (Copyright Reuters 2017)

Oil prices were little changed on Tuesday as expectations of an extended OPEC-led production cut were canceled out by rising output in the United States.

Continue Reading Below

Brent crude futures <LCOc1>, the international benchmark for oil prices, were at $62.25 per barrel at 0142 GMT, 3 cents above their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $56.43 a barrel, up 1 cent from their last settlement.

Traders said they were avoiding taking on large new positions due to uncertainty in markets.

The Organization of the Petroleum Exporting Countries (OPEC), together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to end a global supply overhang and buoy prices.

The deal to curb output is due to expire in March 2018, but OPEC will meet on Nov. 30 to discuss the outlook for the policy.

Continue Reading Below

OPEC is expected to agree to extend cuts as storage levels remain high despite recent drawdowns, although there are doubts about the willingness of some participants to continue to crimp production.

Outside the group of producers voluntarily withholding output, the biggest headaches for OPEC has been rising U.S. drilling activity, lead by shale oil producers.

Energy consultancy Westwood Global Energy Group said U.S. output would rise even faster than the rising rig count - which has jumped from 316 rigs in mid-2016 to 738 last week - implies, as producers get more productive per well.

"Westwood Global Energy forecasts an 18 percent increase in active rigs in 2018 but more rapid demand growth in certain service areas as operators focus on efficiency and delivering more for less," the consultancy said.

 

(Additional reporting by Keith Wallis; Editing by Joseph Radford and Richard Pullin)