Oil Prices Rise Above $56

Oil strengthened slightly on Tuesday, supported by an OPEC-led effort to cut output while rising production elsewhere kept prices within the narrow ranges that have contained them so far this year.

Brent, the international crude oil benchmark, was 45 cents higher at $56.04 a barrel on Tuesday. US light crude oil was up 35 cents at $53.28, Reuters reported. 

The two benchmarks fell 2% on Monday. They are both now in the middle of $5 per barrel trading range seen since early December.

“The usually fairly volatile oil price has barely budged for two months, the reason being conflicting dynamics in the market,” said Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam.

The Organization of Petroleum Exporting Countries and other exporters, including Russia, have agreed to cut output by almost 1.8 million barrels per day during the first half of 2017 in a bid to rein in a global fuel supply overhang.

But undermining these efforts has been rising production in the US where increased drilling activity, especially by shale oil producers, has lifted overall output to 8.98 million bpd, up 6.5% since mid-2016 and to its highest level since April last year. 

“Oil just appears to be caught in a range at the moment and mainly focused on those supply considerations,” said Ric Spooner, chief market analyst at CMC Markets, in Sydney.

Although OPEC countries are largely sticking to their agreement with compliance around 90%, investors suspect the cuts may not be maintained, preventing them from having a bigger impact on prices.