Energy

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

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

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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.

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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.