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Bullish Citi analysts call for crude oil to hit $70 by year end but elsewhere skepticism grows

CNBC

Citi analysts predict crude oil will hit $70 by the end of 2017   

Crude oil prices could shoot up to $70 a barrel by the end of 2017 as supply and demand levels continue to rebalance in coming months, according to analysts at Citi.

Nearer-term, the research team has raised price estimates modestly by $5 to an average $55 per barrel for the first quarter and by $2 to an average $56 per barrel for the second quarter.

Yet investors will likely have to wait a few more months for a more sustained rise, says Citi in the note published Tuesday, as Brent traded up marginally to around $56 in early European trade.

“Oil prices are not likely to stray far from their current $53-58 per barrel range in the near term as record investor net length and bearish inventory data will likely cap prices until more tangible evidence of a tighter market emerges,” write the analysts.

Citi’s research team is looking to the second quarter for positive effects from both the reported 93 percent compliance level of OPEC participants in last November’s production cut agreement as well as substantial refinery maintenance in Asia scheduled for the spring.

However, a close eye must be kept on delivery timetables, David Ernsberger, Global Head of Energy at S&P Global Platts, told CNBC’s Squawk Box on Tuesday.

“There is the shadow looming of new supply coming to market not just from Iran but also from the U.S. and what we’re looking at heading into the second quarter is when will that oil come to market and will it begin to take the edge off prices a little bit,” he noted.

Looking beyond 2017, Citi’s optimism also fades on expectations that increasing numbers of shale producers will be enticed back into the market by more favorable pricing.

However, the impact of shale is hard to accurately predict given the lack of uniformity in the product says S&P Global Platt’s Ernsberger.

“One cargo of shale oil is not like another and you don’t really know what is going to happen when you put it through your refinery until it lands at your port and that’s a little more uncertainty that even the oil refinery industry – which is used to uncertainty – is really willing to embrace right now,” Ernsberger explained.

“So there’s a stability of new supply issue that really needs to get worked out in the next few years,” he added, saying this was the “big story” regarding shale right now.

US shale oil to rise massively in months: Commerzbank

US shale oil to rise massively in months: Commerzbank   

Another prominent concern in the market is the distribution of derivative positioning with record net long positions and a current long to short positioning ratio of around 10:1, with this being a key reason why oil will soon drop to below $50 per barrel, Eugen Weinberg, Head of Commodity Research at Commerzbank, told CNBC’s Street Signs on Tuesday.

Weinberg also argued that the focus on OPEC compliance levels were like a distracting “magician’s show” while the real action is taking place in the U.S., which he claims is on the way to regaining its crown as the world’s largest oil producer.

“OPEC must at some point recognize and understand that they are no more the marginal producers and marginal production will be coming from shale oil so prices will come under massive pressure during this year once investors recognize oil supplies are not going to disappear,” he opined.

“The world is awash with oil at the moment and there continues to be endless supply so therefore I don’t see a real reason for prices to rise above $60 or $70…so I’m really seeing probably the risks of the prices falling below $50 for a considerable period of time and probably even touching the levels of $40 to $45 this year,” he concluded.

US Crude Oil Up 29 cents

CNBC

US crude settles at $53.83, up 29 cents, after US Treasury imposes sanctions on Iran

Oil prices gave up much of their gains after jumping on Friday as the United States imposed sanctions on some Iranian individuals and entities, days after the White House put Tehran “on notice” over a ballistic missile test.

Front month U.S. West Texas Intermediate crude futures settled 29 cents higher at $53.83 a barrel. For the week, the contract was up about 1 percent.

Brent crude futures were up 24 cents at $56.80 a barrel by 2:34 p.m. ET (1934 GMT). Brent was on track to gain about 2 percent on the week, its first significant weekly rise this year.

Volume in U.S. crude futures was relatively low on Friday, with about 335,000 contracts changing hands by 12:15 p.m., on track to fall short of the 200-day moving average for 528,000 contracts.

This is the first move by the administration of President Donald Trump against Iran. It follows his vows during the 2016 campaign to get tough on Tehran.

Shuaiba oil refinery south of Kuwait City, Kuwait.

Iran relationship a black swan for oil?   

Under the sanctions, announced by the U.S. Treasury, 13 individuals and 12 entities cannot access the U.S. financial system or deal with U.S. companies.

A senior U.S. administration said Friday’s sanctions were an “initial step” in response to Iran’s “provocative behavior,” suggesting more could follow if Tehran does not curb its ballistic missile program and continues support for Houthi militia in Yemen.

The news added to volatility in what had already been a day of choppy trading. Analysts said the market is torn between promised cuts from the Organization of the Petroleum Exporting Countries and fears over rising U.S. shale oil production.

“While the market is taking these actions in stride so far as unlikely to result in a larger military conflict that would put Persian Gulf crude oil supplies at risk, the odds of that scenario are certainly higher than a week ago,” wrote Timothy Evans, energy analyst at Citi Futures in New York.

Trump had warned on Twitter that “Iran is playing with fire” after its missile test.

“The ‘trumperament’ of the new U.S. president is being tested by Iran and soon maybe also by Russia and China,” said Olivier Jakob, managing director of consultancy PetroMatrix. “And that is adding some geopolitical support to crude oil.”

Here's how to play a rally in crude

Here’s how to play a rally in crude   

Comments by Russian energy minister Alexander Novak that oil producers had cut their output as agreed under a deal with OPEC, also helped to support prices, analysts said.

Novak said that Russian companies might cut oil production more quickly than required by its deal with late last year. He said that 1.4 million barrels per day (bpd) was cut from global oil output last month as part of the deal.

Oilfield services firm Baker Hughes reported U.S. drillers added 17 oil rigs in the last week. The count has been recovering since June and now stands at 583 rigs, compared with 467 rigs last year.

Analysts said oil’s advance could run out of steam quickly. PVM Oil Associates noted the market “is sandwiched between supportive OPEC-led output cuts and the bearish impact of a resurgence in U.S. crude production.”

The prospect of more oil output from Nigeria and also from other non-OPEC producers such as Brazil also looms.

“Record speculative length threatens to trigger a sharp price fall as unease builds amid the ongoing wait for a conclusive upside breakout,” Commerzbank said in a note.

— CNBC’s Tom DiChristopher contributed to this report.

Oil Rebounds

CNBC

Oil rebounds as US sanctions individuals and entities over Iran missile test

A worker stands next to a pump jack at an oil field Sergeyevskoye owned by Bashneft company north from Ufa, Bashkortostan, Russia.
A worker stands next to a pump jack at an oil field Sergeyevskoye owned by Bashneft company north from Ufa, Bashkortostan, Russia.

Oil prices recovered on Friday after the United States announced sanctions related to Iran’s ballistic missile test, and on signs big oil producers are cutting output.

The Trump administration on Friday rolled out new measures against 13 individuals and 12 entities following Tehran’s ballistic missile test.

U.S. President Donald Trump said “nothing is off the table” in dealing with the country, which has seen its oil exports surge after the lifting of international sanctions last year under the previous U.S. administration.

“The ‘trumperament’ of the new U.S. president is being tested by Iran and soon maybe also by Russia and China,” Olivier Jakob, managing director of consultancy PetroMatrix, said. “And that is adding some geopolitical support to crude oil.”

Shuaiba oil refinery south of Kuwait City, Kuwait.

Iran relationship a black swan for oil?   

Brent crude futures were up 27 cents at $56.83 a barrel by 1:07 p.m. ET (1807 GMT). Brent was on track to gain more than 2 percent on the week, its first significant weekly rise this year.

Front month U.S. West Texas Intermediate crude futures climbed 24 cents to $53.78 a barrel. For the week, the contract is up about 1 percent.

Prices held their gains after oilfield services firm Baker Hughes reported U.S. drillers added 17 oil rigs in the last week. The count has been recovering since June and now stands at 583 rigs, compared with 467 rigs last year.

Comments by Russian energy minister Alexander Novak that oil producers had cut their output as agreed under a deal with OPEC, also helped to support prices, analysts said.

Russia’s Novak said that Russian companies might cut oil production more quickly than required by its deal with Organization of the Petroleum Exporting Countries (OPEC) late last year.

He said that 1.4 million barrels per day (bpd) was cut from global oil output last month as part of the deal.

Prices briefly pared gains after the official start of the day session, reflecting pent-up selling pressure following the U.S. jobs report for January, according to John Kilduff, founding partner at energy hedge fund Again Capital.

“The energy market did not necessarily like the weak wage component of the employment report. Gasoline demand is already weak, due to higher prices, so that hurts energy disproportionately,” he told CNBC.

The U.S. Labor Department reported the United States added more jobs than analysts expected and the unemployment rate ticked up to 4.8 percent.

Here's how to play a rally in crude

Here’s how to play a rally in crude   

News that Norway restarted a field that produces 100,000 barrels per day also weighed on prices, Kilduff said.

Analysts said oil’s advance could run out of steam quickly. PVM Oil Associates noted the market “is sandwiched between supportive OPEC-led output cuts and the bearish impact of a resurgence in U.S. crude production.”

The prospect of more oil output from Nigeria and also from other non-OPEC producers such as Brazil also looms.

“Record speculative length threatens to trigger a sharp price fall as unease builds amid the ongoing wait for a conclusive upside breakout,” Commerzbank said in a note.

— CNBC’s Tom DiChristopher contributed to this report.

US Crude up 29 cents

CNBC

US crude settles at $51.37, up 29 cents as IEA sees oil market tightening

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Oil prices edged higher on Thursday, but swelling U.S. crude stockpiles limited the rebound from a one-week low after the International Energy Agency said oil markets had been tightening even before cuts agreed by OPEC and other producers took effect.

The IEA said that while it was “far too soon” to gauge OPEC members’ compliance with promised cuts, commercial oil inventories in the developed world fell for a fourth consecutive month in November, with another decline projected for December.

U.S. West Texas Intermediate crude oil settled up 29 cents at $51.37 per barrel, having dropped to a one-week low on Wednesday at $50.91 a barrel.

International benchmark Brent crude was up 34 cents at $54.26 a barrel by 2:33 p.m. ET (1933 GMT), after closing down 2.8 percent in the previous session.

A strong U.S. dollar limited oil’s advance.

RBC strategist: Oil will grind higher

RBC strategist: Oil will grind higher   

Prices tumbled to session lows after U.S. Energy Information Administration (EIA) data showed crude inventories rose unexpectedly last week as refineries sharply cut production.

U.S. commercial crude inventories rose by 2.3 million barrels in the week through Jan. 13 to 485.5 million barrels, well above the expectations of a 342,000-barrel decline.

The data also showed much larger-than-expected increases in stocks of gasoline and a surprise drop distillates inventories. Stockpiles of gasoline in the U.S. East Coast swelled to the highest weekly levels on record for this time of year, when refiners typically begin storing barrels ahead of summer driving season.

“At the end of the day, the focus is on the bigger picture and the bigger picture still looks positive which is why we are still up,” said Scott Shelton, energy specialist at ICAP in Durham, North Carolina.

“The bigger picture includes the OPEC/non-OPEC supply cuts and the IEA report, which was pretty supportive.”

Oil prices have gyrated this year as the market’s focus has swung from hopes that oversupply may be curbed by output cuts announced by the Organization of the Petroleum Exporting Countries and other producers to fears that a rebound in U.S. shale production could swamp any such reductions.

The head of the IEA, Fatih Birol, said in Davos, Switzerland, that he expected U.S. shale oil output to rebound by as much as 500,000 barrels per day over the course of 2017, which would be a new record.Oil and Gas

Futures Now: Oil slips on supply concerns

Futures Now: Oil slips on supply concerns   

It raised its 2016 demand growth estimate, and said the data indicated that rising demand was slowly tightening global oil markets.

Still, analysts warned that keeping the cuts was crucial, particularly as a resilient U.S. shale industry threatened to add more barrels to the market.

“Discipline and strict adherence to the new quotas will be needed probably throughout 2017 and beyond to see the long-awaited and sustainable rebalancing finally arrive,” PVM Oil Associates analyst Tamas Varga said in a note.

OPEC, which is cutting oil output alongside independent producer Russia for the first time in years, wants a lasting partnership with Moscow, Saudi Energy Minister Khalid al Falih told Reuters. He also said extending the deal for a full year if the market rebalances was not needed.

OPEC itself said its cuts would help balance the market, and said its output had already fallen in December. But it also pointed to the possibility of a rebound in U.S. output amid higher oil prices.

US Crude nearly down 2,7%

CNBC

US crude settles at $51.08, down nearly 2.7% on prospect of rising US shale production

A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Nick Oxford | Reuters
A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.

Oil prices fell to their lowest level in a week on Wednesday on expectations U.S. producers would boost output, while OPEC signaled a drop in the global oil supply surplus this year as the producer group’s output fell from a record high.

U.S. West Texas Intermediate (WTI) crude oil futures settled down $1.40, or 2.7 percent, at $51.08 per barrel.

Brent crude futures, the international benchmark for oil prices, were down $1.51, or 2.7 percent, at $53.96 a barrel at 2:34 p.m. ET (1734 GMT).

U.S. shale production is set to snap a three-month decline in February, the U.S. Energy Information Administration said on Tuesday, as energy firms boost drilling activity with crude prices hovering near 18-month highs.

February production will edge up 40,750 barrels per day (bpd) to 4.748 million bpd, the EIA said. In January, it was expected to drop by 5,900 bpd.

Too much OPEC optimism?

Too much OPEC optimism?   

“The petroleum markets have turned lower again in Wednesday trade amid talk that higher oil prices will translate into additional U.S. shale-oil production as a counter-balance to OPEC efforts to trim supply and reduce excess inventories,” Tim Evans, Citi Futures’ energy futures specialist, said in a note.

The Organization of the Petroleum Exporting Countries signaled a falling oil supply surplus in 2017 on Wednesday as the exporter group’s output slips from a record high ahead of a deal to cut supply and outside producers show positive initial signs of complying with the accord.

Under the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million bpd, initially for six months, to bring supplies back in line with consumption.

However, OPEC, in a monthly report, also pointed to the possibly of a rebound in U.S. output, as higher oil prices following supply cuts by other producers support increased shale drilling.

“OPEC’s regular dose of bullish rhetoric intending to prop up values has begun to wear thin,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note

OPEC, excluding Indonesia, pumped 33.085 million barrels per day (bpd) last month, according to figures OPEC collects from secondary sources, down 221,000 bpd from November.

OPEC cut its forecast of supply in 2017 from non-member countries following pledges by Russia and other non-members to join OPEC in limiting output.

Risk in a few years of an oil price shock: Crescent Petroleum

Risk in a few years of an oil price shock: Crescent Petroleum   

OPEC now expects non-OPEC supply to rise by 120,000 bpd this year, down from growth of 300,000 bpd last month, despite an upwardly revised forecast of U.S. supply.

A committee responsible for monitoring compliance with the agreement meets in Vienna on Jan. 21-22.

The output cuts agreed by OPEC and others are likely to come largely from field and refinery maintenance, BMI Research said in a note. It said oil producers are expected to use lower volumes needed for domestic power generation in a bid to maintain export volumes.

“Sticking to output targets is important but export volumes from the participating countries are a much better indicator of how the cuts will affect the market,” it said.

“Participating members are keen not to sacrifice vital export revenue so are trying to find ways to limit domestic crude usage in order to prioritize filling their contracts to foreign refiners.”

Analysts forecast U.S. crude stocks fell by about 1 million barrels in the week ended Jan. 13. The American Petroleum Institute (API) will release its inventory report on Wednesday at 4:30 p.m. EST.

Crude up 11 cents

US crude settles at $52.23, up 11 cents, as analysts forecast big draw in stockpiles

CNBC

Oil prices edged higher on Tuesday on forecasts of a steep draw in U.S. crude oil stocks that could indicate a global oversupply is starting to shrink.

Analysts polled by Reuters expected weekly U.S. crude oil inventories to show a draw of 2.4 million barrels in the week ending Dec. 16.

The American Petroleum Institute, an industry group, said U.S. crude stockpiles fell by 4.1 million barrels in the previous week.

International Brent crude oil futures rose 64 cents to $55.56 per barrel at 4:56 p.m. ET (2156 GMT).

U.S. West Texas Intermediate (WTI) crude oil futures settled Tuesday’s trade up 11 cents at $52.23 per barrel.

OPEC Vienna Deal bigger thana nyone thought

OPEC will comply with roughly 80 percent of deal quota: Analyst   

Both contracts rose despite a strong dollar, which hit a 14-year high. Crude prices often decline when the dollar strengthens, as it then becomes more expensive to hold dollar-denominated oil contracts.

“There are expectations that we’ll see supplies start to tighten by the end of the year,” said Phil Flynn, analyst at Price Futures Group in Chicago. “We’ll get more heating oil demand this weekend and could see a drop in production next week and even last week because of the cold temperatures.”

One outlying factor that has flummoxed some analysts has been a series of increases in U.S. inventories at the key oil storage hub in Cushing, Oklahoma. Flynn said this rise has been largely offset by a drop in Gulf Coast inventories.

Crude stocks fell more than expected last week, feeding expectations for another large drop in this week’s figures.

Traders said they were starting to square their books ahead of the upcoming Christmas weekend and the week running up to New Year. As a result, and barring major price-moving news, they said markets would likely remain tepid this week.

A deal to cut global supply among OPEC and non-OPEC producers struck this month has boosted oil prices to 17-month highs. The gains have set up 2016 to be the first year since 2012 in which Brent has risen.

“We are in a wait-and-see mood after OPEC-newsflow caused much volatility,” said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg. “The new balance seems to be between $53 and $57 a barrel on Brent for the next weeks.”

Russian energy minister Alexander Novak told Russian newspaper Vedomosti that Russia may extend a production cut beyond the first half of the year if needed.

Crucial price for oil is $55: Expert

Crucial price for oil is $55: Expert   

Reports late on Monday that Saudi Arabian crude oil exports fell by 176,000 barrels per day (bpd) in October had initially supported markets, but the effect later fizzled out due to an increase in Saudi exports of refined fuel products.

Barclays bank said that it expected a Saudi crude export cut to largely affect light crude oil grades, which mostly go to the United States.

“We think it is likely that the Saudis will curtail production/exports of their Arab Light crude and other lighter crudes this spring, easing the typical pre-summer ramp up in shipments to the U.S.,” the British bank said.

Saudi Arabia’s rising refined product output is part of a wider trend that affects mostly Asia.

Asia is seen posting its biggest net refining capacity additions in three years in 2017, further boosting demand for crude in the world’s biggest and fastest growing oil consuming region.

The increase amounts to about an additional 1.5 percent of refining capacity on top of Asia’s total installed capacity of nearly 29 million bpd.

Still, traders see no outright supply shortage for Asian refineries, as OPEC is shielding most of its Asian customers from the planned cuts.

Crude Oil up 22 cents

US crude settles at $52.12, up 22 cents as supply outlook remains unclear

CNBC

Pump jacks in an oil field over the Monterey Shale formation near Lost Hills, Calif.
Pump jacks in an oil field over the Monterey Shale formation near Lost Hills, Calif.

Oil prices were little changed on Monday, with few headlines to influence a market waiting to see whether U.S. production from shale fields will grow enough to offset planned output cuts by OPEC, Russia and other producers next year.

Brent crude futures traded at $54.93 per barrel at 2:35 p.m. ET (1935 GMT), down 28 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 22 cents $52.12 a barrel on its last day as the front-month contract.

“Implied U.S. output increases…will offset a significant portion of the planned OPEC production cuts especially since we don’t anticipate sustained strong compliance,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

“While adherence to (OPEC) cutbacks could be quite high initially, we will be surprised by compliance much above 60 percent by the end of the first quarter as (U.S.) shale responds to a higher price environment,” Ritterbusch said.

Look for brent hitting $63 to $65 mark: Expert

Look for brent hitting $63 to $65 mark: Expert   

Traders noted a possible delay in Libyan exports provided some support to oil prices earlier in the session.

Late last week, a group guarding oil infrastructure in Libya said it had reopened a long-blockaded pipeline leading from the oilfields of Sharara and El Feel, but a separate group had prevented a production restart at El Feel.

The U.S. dollar hit 2002 highs last week. It was up by nearly 0.1 percent on Monday. A strong dollar makes oil more expensive for holders of other currencies.

But some analysts expect the strength in oil prices to continue into early 2017 due to the deal between the Organization of the Petroleum Exporting Countries and other producers to cut almost 1.8 million barrels per day (bpd) in oil output from January.

“With investors now expecting a relatively high level of compliance with the production-cut agreements, prices should be well supported,” ANZ bank said on Monday.

$55-$60 oil is okay for reflation trades: Strategist

$55 to $60 oil is OK for reflation trades: Strategist   

Speculators raised their holdings of Brent crude oil futures to a new record high last week, following the first deal in 15 years to be agreed between OPEC and non-OPEC producers to cut output.

However, other market factors cast a shadow on the outlook, preventing prices from rising further.

In the United States, which did not participate in the output-reduction deal, drilling for new oil has increased for seven straight weeks.

Drillers added 12 oil rigs in the week to Dec. 16, bringing the total count to 510, the highest since January, though still below 541 rigs a year ago, energy services firm Baker Hughes said on Friday.

“Since its trough on May 27, 2016, producers have added 194 oil rigs (+61 percent) in the U.S.,” U.S. bank Goldman Sachs said.

As a result, U.S. oil production is edging up, rising from below 8.5 million bpd in July to almost 8.8 million bpd by mid-December.

Crude Oil in USA down at $50.90

US crude settles down 14 cents at $50.90, hit by dollar strength after Fed rate hike

CNBC

Stronger dollar weighs on oil

Stronger dollar weighs on oil   

Oil prices reversed earlier losses on Thursday after failing to break below technical support levels and as OPEC members told customers they would cut crude supplies as part of the cartel’s agreement to reduce output.

Earlier in the day, prices fell to the lowest level in a week as the dollar rallied following an increase in U.S. interest rates.

The dollar rose to a 14-year high against a basket of other currencies after the U.S. Federal Reserve raised rates for the first time in a year on Wednesday. A stronger dollar, in which oil is traded, tends to hit crude demand as it makes fuel purchases more expensive for users of other currencies.

International Brent crude oil futures rose 18 cents to $54.08 a barrel at 2:35 p.m. ET (1935 GMT), down 14 cents from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures settled down 14 cents at $50.90 per barrel.

Oil outlook for 2017

Oil outlook for 2017   

“Brent tested the key $53 (a barrel) support level and now we’re seeing some buying because there is too much optimism as the market waits to see how some of OPEC’s supply cuts come through in the export data,” said Troy Vincent, an oil analyst at ClipperData in Louisville, Kentucky.

The Organization of the Petroleum Exporting Countries and other producers led by Russia have promised to cut production by almost 1.8 million barrels per day (bpd) in an attempt to clear a global oversupply that has depressed prices for more than two years.

National oil companies in Saudi Arabia, Kuwait and Abu Dhabi have told customers in Asia they would cut crude supplies following OPEC’s decision to cut output. Saudi Arabia also told U.S. and European customers it would reduce oil deliveries, and traders said other OPEC members are expected to do the same.

“These delivery cut announcements provide psychological support that OPEC will follow through with their planned output cuts,” ClipperData’s Vincent said.

ANZ bank said on Thursday oil markets would move into a substantial deficit in the first quarter of 2017 if OPEC and other producers reduced output as promised.

“This will likely push oil prices well above $60 per barrel early next year,” it said.

See oil in a range of $60-$80: John Hess

See oil in a range of $60-$80: John Hess   

Oil companies have slashed costs in order to survive the low price environment, industry data show.

“2017 will be the third year investments go down, with 3 percent (declines). You need to go back to the ’80s to see three consecutive years of investment cuts,” said Audun Martinsen, vice president for Oilfield Service Research at Rystad Energy.

Crude prices also received some support from falling U.S. crude inventories.

Data from the U.S. Energy Information Administration (EIA) showed that commercial crude inventories last week declined by 2.56 million barrels to 483.19 million barrels.

However, traders said it is far from clear whether OPEC and other producers will follow through with their announced cuts.

OPEC pumped 33.87 million bpd last month, according to figures it collects from secondary sources, up 150,000 bpd from October, OPEC said in a monthly report on Wednesday.

That shows the group’s output has continued to rise, adding to a global glut, ahead of the January start of its first supply cut agreement since 2008.

That could raise questions about its ability to comply fully with the deal.

US drillers pumped like crazy last week, and that’s a ‘major concern’ for OPEC

Oil outlook for 2017

Oil outlook for 2017   

Thanks, OPEC.

U.S. crude oil production surged by about 100,000 barrels a day last week, providing further evidence that American drillers are responding quickly to the higher prices that OPEC created by agreeing to curtail their own production.

The Organization of Petroleum Exporting Countries reached an agreement to cut production by 1.2 million barrels a day last month and got commitments from some nonmembers to 558,000 barrels a day in reductions this past weekend. Hopes for output limits had boosted prices ahead of the agreements.

American drillers were not among the nonmembers who agreed to cut. In the lower 48 states, they drove production to nearly 8.8 million barrels a day in the week through Dec. 9, according to the U.S. Energy Information Administration. That is up from about 8.7 million barrels a day the week prior.

To be sure, the weekly production figures are preliminary, and big jumps are not too rare. But a steadily rising four-week average for U.S. oil output points to an overall recovery. At 8.72 million barrels a day, the average was at its highest level since June.

Analysts warn that OPEC’s bid to balance an oversupplied market by cutting production could backfire if it causes oil prices to rise too much. Those higher prices could cause U.S. drillers sidelined by low oil prices to start pumping more oil.

The weekly jump in U.S. output is a “major concern” for OPEC members, said John Kilduff, founding partner at energy hedge fund Again Capital.

“This is exactly what several of them had been worried about. This deal gave new life to the shale industry,” he told CNBC. “OPEC’s going to have its hands full with them for a time.”

Recent hedging activity has allowed drillers to lock in prices for future deliveries of oil at $55 a barrel, a price that makes more of their acreage profitable, according to Kilduff, who has been bearish on oil prices and skeptical of OPEC’s ability to enforce production cuts.

The production surge follows an increase in the U.S. oil rig count of 21 rigs — the biggest one-week jump since a recovery in drilling activity began in June. Drillers have added a net 182 rigs since the count bottomed out at 316 rigs in May, according to data provided by oilfield services firm Baker Hughes.

The total U.S. rig count stood at 498 at last count, close the year-ago count of 524 rigs.

US Crude up 15 cents at $52.98

US crude ekes out another 17-month closing high, settles up 15 cents at $52.98 after producers confirm output cuts

CMBC

Oil prices surge on output freeze

Oil prices surge on output freeze   

Oil traded roughly flat on Tuesday, supported by strong demand in Asia and supply cuts by Abu Dhabi, Kuwait and Qatar as part of production curbs organized by OPEC and other exporters.

However, the market faced pressure as investors closed positions to take profits on strong gains the day before.

Traders said there was significant profit-taking after oil shot to mid-2015 highs earlier this week, boosted by the deal reached by the Organization of the Petroleum Exporting Countries and other exporters to cut output by a combined 1.8 million barrels per day.

Oil's rise a major head fake: Pro

Oil’s rise a major head fake: Pro   

Analysts said oil markets were still broadly supported by the arrangement to crimp output. In addition, the International Energy Agency said on Tuesday that it had raised its forecsat for global oil consumption, which will also help reduce the overhang of supply.

In its monthly oil market report, the IEA said revisions to its estimate of Chinese and Russian consumption had prompted it to raise its forecast for global oil market demand growth this year by 120,000 barrels per day to growth of 1.4 million bpd.

However, analysts said prices will turn fast if the market believed compliance was lacking.

“The following three to six months will provide us with an answer as to whether the foundation is strong enough to hold the building or will it collapse like a house of cards,” PVM analysts wrote.

In a sign that producers are acting on their plans to cut output, Abu Dhabi National Oil Company (ADNOC) told customers it would reduce Murban and Upper Zakum crude supplies by 5 percent and Das crude exports by 3 percent.

Oil producers are pragmatic: Expert

Oil producers are pragmatic: Expert   

Kuwait’s Petroleum Corporation (KPC) did similar, notifying its customers of a cut in their contractual crude oil supplies for January.

Meanwhile, China’s November crude output fell 9 percent on a year earlier to 3.915 million bpd , data showed on Tuesday, but recovered from October’s 3.78 million bpd, which was the lowest in more than seven years.

That came as China’s refinery throughput hit a daily record in November of 11.14 million bpd, up 3.4 percent year-on-year.

“Declines in Chinese … crude oil output and expansion of its strategic crude reserves underpin our view for China’s crude oil imports to strengthen over the coming quarters,” said BMI Research.

In India, Asia’s No.2 oil consumer behind China, fuel demand rose 12.1 percent in November compared with the same month last year, hitting 16.64 million tonnes (4.07 million bpd).