Global oil prices dipped on Feb. 28 but continued to trade in a tight range with the OPEC-led output cuts offset by increasing crude production from the U.S.
OPEC has so far surprised the market by showing record compliance with oil-output curbs, and could improve in coming months as the biggest laggards—the United Arab Emirates and Iraq—pledge to catch up quickly with their targets.
RELATED: UAE, Iraq Pledge To Catch Up With OPEC Output Target
But while the Nov. 30 agreement to reduce production prompted oil prices to rise $10 a barrel (bbl), they have been trading in a narrow $3 range in recent weeks.
Benchmarks Brent and West Texas Intermediate (WTI) crude oil on Feb. 28 traded several cents on either side of the previous day's close. By 5:30 a.m. CT (11:30 GMT), Brent was 16 cents lower at $55.77/bbl while WTI was 9 cents lower at $53.96/bbl.
"Oil is well and truly stuck and the falling futures volumes does not indicate that we have much of a bull-bear fight either," Saxo Bank head of commodity strategy Ole Hansen said.
"Having failed on a couple of occasions to break higher it is only natural to see it correct lower. I'm looking for a retracement to $55 on Brent and $52.70 on WTI," Hansen said.
OPEC agreed to curb output by about 1.2 MMbbl/d from Jan. 1, the first cut in eight years.
In addition, 11 non-OPEC oil producers have promised to cut their output—Russia reduced production by 124 Mbbl/d this month compared with October levels, Interfax reported on Feb. 28 citing a source familiar with the data.
Several analysts noted record high bets on rising Brent and WTI prices, as showed by data from the InterContinental Exchange and the U.S. Commodity Futures Trading Commission (CFTC).
"Increasingly, the high degree of speculative interest is hanging over oil prices like the sword of Damocles. If financial investors were to unwind their positions, a sharp fall in prices would be on the cards," Commerzbank said in a note to clients.
Broadly, analysts and economists expect an average 2017 Brent price of 57.52/bbl, according to a Reuters poll issued on Feb. 28.
Oil industry and OPEC country sources told Reuters Saudi Arabia wanted crude prices to rise to $60/bbl this year, a level it saw as encouraging investments but not spurring a fresh surge in U.S. shale production.
But a report from consultancy Rystad Energy issued earlier this month said the break-even price for U.S. shale oil producers fell last year to an average $35/bbl.
U.S. producers boosted crude production to more than 9 MMbbl/d during the week ended Feb. 17 for the first time since April 2016, according to federal data. U.S. drillers were operating 602 rigs last week, the most since October 2015, energy services firm Baker Hughes Inc. (NYSE: BHI) said Feb. 24.
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