US Crude Oil Inventories Hit Record Last Week

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The output deal appears aimed at holding oil prices within a $50-$60 per barrel range - high and stable enough to provide producing countries a lift, while not going too high as to encourage a flood of US shale oil back onto the market, which would prolong the global oversupply and send prices lower. This would seem to paint a promising picture for the future of oil markets, only a month and a half into the production cut agreement and the prices have been moving to and fro in the $50-$60 band. It was trading at $53.13 before the supply data. The increase from 120,000 barrels per day (BPD) to 240,000 BPD is due to a pick-up in drilling activities and investment in the U.S., Kallanish Energy learns. "For this reason, we expect limited OPEC oil output growth over the next 5 years".

"OPEC has set itself a high benchmark given its high January compliance, applying pressure to keep this record up in order to not disappoint the market", BMI Research said in a note.

But undermining these efforts has been rising production in the United States, where increased drilling activity especially by shale oil producers has lifted overall output to 8.98 million bpd, up 6.5 percent since mid-2016 and to its highest level since April previous year. It moved USA crude oil inventories to new record high levels.

"Saudi Arabia has never stopped worrying about market share-they've just made a decision to focus on a specific region to carry out their market share battle", said Vincent. OPEC's compliance with a deal to ease a global supply glut helped sustain part of crude's gains.

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Many analysts say oil producers will have to cut production more quickly to drain the global oversupply this year. Although OPEC is boasting a 90 percent plus compliance level, the same can not be said about the other non-OPEC members who are also involved in the deal. West Texas Intermediate crude reached $55 a barrel in early January amid expectations for the OPEC cuts, but the rally has lost momentum.

Saudi Arabia reported that it reduced output by 717,600 barrels a day last month to 9.748 million a day, according to a monthly report from OPEC on Monday.

Iraq's oil exports are poised to decline to a seven-month low in March as ongoing maintenance at some of its biggest fields coincides with a seasonal slump in shipments.

US oil production has been rising, and held steady at just under 9 million barrels a day last week. Later in December, Russia and other producers outside the group committed to take 558,000 barrels a day out of the market.