Oil Little Changed as Market Downplays U.S.-Iran Missile Test Dispute

Oil prices were little changed in U.S. trade on Thursday, retracing early gains as traders grew less concerned about mounting tensions between the United States and Iran, but prices were still supported by evidence that OPEC and other big exporters were cutting production.

"Traders seem to have concluded the dispute between the U.S. and Iran over a recent missile test represents more of a war of words than the start of a military confrontation that would put supplies from the wider Persian Gulf at risk," Tim Evans, Citi Futures' energy futures specialist, said in a note.

U.S. President Donald Trump said on Thursday in a tweet that Iran had been "put on notice" after the country tested a ballistic missile.

Brent futures were up 9 cents, or 0.2 percent, at $56.89 a barrel by 11:18 a.m. EST (1618 GMT). U.S. West Texas Intermediate crude was down 4 cents, or 0.1 percent, at $53.84 per barrel.

Earlier, both Brent and WTI traded at their highest levels since early January on indications producers from the Organization of the Petroleum Exporting Countries (OPEC) and other exporters were following through on their agreements to cut output to reduce a global supply glut.

A Reuters survey this week found that most key oil producers were sticking to the deal, with compliance above 80 percent.

Russian oil output contracted in January by 100,000 bpd, Energy Ministry data showed on Thursday.

The curbs follow an agreement last year by OPEC and other exporters to reduce supplies by a combined 1.8 million barrels per day (bpd) to prop up prices that remain at about half their mid-2014 levels.

OPEC and non-OPEC producer Russia, however, are shielding Asian customers from those supply cuts and instead have reduced deliveries to Europe and the Americas.

Higher crude prices in recent months, meanwhile, have prompted U.S. energy producers to drill for more oil.

U.S. crude inventories rose last week by 6.5 million barrels to 494.76 million barrels, the Energy Information Administration said on Wednesday, far exceeding forecasts for an increase of 3.3 million barrels.

Inventories in the United States, the world's biggest oil consumer, have been near record highs for much of the past year and domestic production is rising as U.S. companies drill for shale oil.

(By Scott DiSavino; Additional reporting by Christopher Johnson in London, Keith Wallis in Singapore and Aaron Sheldrick in Tokyo; Editing by David Gregorio)