Oil rebounded after slipping below $69 a barrel on Thursday, supported by a record drawdown of U.S. crude stockpiles at the Cushing, Oklahoma delivery hub, despite concerns that OPEC-led output cuts will increase supply from the United States.
Crude is just below its highest price since December 2014, supported by supply cuts led by the Organization of the Petroleum Exporting Countries and concern that unrest in producer nations such as Nigeria could further curb output.
U.S. crude inventories fell 6.9 million barrels last week, compared with forecasts for a 3.5 million-barrel draw, the U.S. Energy Information Administration said. Crude supplies at the Cushing, Oklahoma delivery hub for U.S. crude futures fell 4.2 million barrels in the week, the largest draw since at least 2004.
After falling the previous week due to cold weather, U.S. crude production rose to 9.75 million barrels per day last week.
OPEC's monthly report on Thursday raised its forecast for oil supply from non-members in 2018.
"Higher oil prices are bringing more supply to the market, particularly in North America and specifically tight oil," OPEC said in the report, using another term for shale.
Brent crude pared losses, but falling to $69.31, down 7 cents a barrel at 2:39 p.m. ET, after earlier slipping to $68.80 a barrel earlier in the session. On Monday it touched $70.37, the highest since December 2014. For its part, U.S. WTI crude settled down 2 cents at $63.95, having hit its highest since December 2014 on Tuesday.
Brent has risen from $61 a barrel in early December and some analysts say the rally may be about to run out of steam.
"The upside is now limited for oil prices," said Fawad Razaqzada, market analyst at brokerage Forex.com. "U.S. oil producers will ramp up production in the coming months."
OPEC's report follows a forecast from the EIA on Tuesday that it expects U.S. oil output to continue to rise in February with production from shale increasing by 111,000 bpd.
The agency previously said U.S. output could reach 10 million bpd in February and 11 million bpd in 2019.
Even so, traders said prices were unlikely to fall far due to the OPEC-led curbs and the risk of further disruptions.
Militant group Niger Delta Avengers threatened to attack Nigeria's oil sector in the next few days, potentially hampering supplies in Africa's largest exporter.
"The impact of such a threat, if carried out, would be significant on the global supply and demand balance," said Tamas Varga of oil broker PVM. "The market is still sensitive to geopolitical developments."