SINGAPORE (Reuters) – Oil prices edged up on Thursday as U.S. crude inventories fell despite a rise in production, while outside the United States an OPEC-led supply cut continued to tighten the market. Brent futures LCOc1, the international benchmark for oil prices, were at $60.59 per barrel at 0647 GMT, up 10 cents from their last close. Brent has risen by more than a third since its 2017-lows last June.
U.S. West Texas Intermediate (WTI) crude CLc1 was at $54.32 a barrel, up 2 cents from its last settlement, and some 30 percent above its 2017-low in June. Confidence has been fueled by an effort this year lead by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to hold back about 1.8 million barrels per day (bpd) in oil production to tighten markets.
Saudi Arabian Energy Minister Khalid al-Falih said on Thursday in Thailand that supply and demand balances continued to tighten and global oil inventories were falling, while compliance with the OPEC-led pact to curb supplies has been “excellent”. Russian oil output edged up to 10.93 million barrels per day (bpd) in October from 10.91 million bpd in September, official data showed on Thursday, but the country remains in compliance with the deal to curb output.
Oil was also supported by falling U.S. commercial crude inventories despite rising output. U.S. commercial crude oil inventories fell by 2.4 million barrels in the week to Oct. 27 to 454.9 million barrels, according to data from the Energy Information Administration on Wednesday (EIA).
“U.S. crude inventories are back on a downward trend after disruptions from hurricane Harvey caused a small build,” said William O‘Loughlin, analyst at Rivkin Securities. This came despite a 46,000 bpd increase in production to 9.55 million bpd. U.S. crude output is now up over 13 percent since mid-2016. Goldman Sachs said in a note that it expects year-on-year U.S. oil production growth of 0.8 million to 0.9 million bpd at year-end 2017.
That would put end-of-year output at 9.6-9.7 million bpd, only slightly above current levels. The EIA said that a record 2.1 million bpd of U.S. crude was exported in the latest week. Traders said this was due to WTI’s wide discount to Brent which make exports attractive. Despite the generally bullish sentiment, some analysts warned of too much confidence in higher prices.“The overbought nature of the daily RSI’s (relative strength index).. has made both contracts (Brent and WTI) vulnerable to short-term profit taking on the headline-driven news,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.