“Nobody wants to be short crude below $US70 when there is unrest in the Middle East,” said Dennis Kissler, senior vice president at BOK Financial.
Separately, OPEC’s crude production remained steady last month before the onset of new supply cutbacks by the group and its allies.
The Organisation of Petroleum Exporting Countries pumped an average of 28.05 million barrels a day in December as it persevered with supply restraints agreed earlier in the year, according to a Bloomberg survey. Reductions by the United Arab Emirates and Angola were offset by other countries such as Nigeria.
Output is set to fall further this month, as the wider coalition known as OPEC+ begins additional cuts of about 900,000 barrels a day in a bid to stave off a new surplus and defend flagging crude prices.
Oil futures have slumped about 20 per cent since they neared $US100 a barrel four months ago, amid surging supplies from the US and OPEC’s other rivals. The extra crude could prove too much for global fuel demand, which is projected to experience considerably slower growth this year.
The UAE made last month’s biggest supply reduction, cutting by 70,000 barrels a day to 3.08 million barrels a day. That still left the country’s output above its quota for December, and also higher than a new, increased target that takes effect this month.
Angola’s production declined again in the country’s final month as an OPEC member, dwindling by 40,000 barrels a day to 1.1 million a day. Luanda announced late last month it would quit the cartel, effective January 1, ending 16 years of membership amid a bitter dispute over its production quota.
The West African nation refused to accept a reduced limit imposed by OPEC’s leaders, but its output in December – eroded by years of underinvestment – was in line with the level it had rejected.
Supply declines from these two members were tempered by increases elsewhere. Nigeria bolstered supplies by 50,000 barrels a day to 1.49 million a day in December, in line with a revised quota that it successfully negotiated for this year.
Crude traders are sceptical that the 22-nation OPEC+ alliance will fully deliver on the fresh supply curbs taking effect this month, because many members have already lost as much production – and associated revenue – as they can afford. The International Energy Agency estimates the pledged cutback will translate into an actual cut of about 500,000 barrels a day.
Iraq, which has a patchy track record on implementation and pressing financial needs for export revenue, would need to cut production by a substantial 290,000 barrels a day to meet its target for January.
OPEC+ will hold an online monitoring meeting to review market conditions on February 1, and ministers are scheduled to meet in person at the group’s Vienna headquarters in early June.
Bloomberg’s survey is based on ship-tracking data, information from officials and estimates from consultants, including Kpler, Rapidan Energy Group and Rystad Energy.