Oil Near Multi-Week Highs

Global oil prices slipped on Wednesday as the US dollar, in which payments for crude are made, rose but they traded broadly at multi-week highs after OPEC signaled optimism over its deal with other producers to curb output.

Brent crude was down 44 cents, or 0.8%, at $56.83, having touched its highest since Feb. 2 at $56.20 in the previous session. The US West Texas Intermediate April crude contract, the new front-month future, was down 34 cents, or 0.6%, at $53.99 a barrel, Reuters reported.

Nevertheless, an agreement by major oil producers under the OPEC umbrella, which came into place at the start of this year, lent a floor to oil prices.

Mohammad Barkindo, secretary-general of the Organization of Petroleum Exporting Countries, told a conference on Tuesday that January data showed conformity from member countries in the output cut at above 90%.

Adding to the bullish sentiment, hedge funds raised their combined net long position in the three main derivative contracts linked to Brent and WTI by 51 million barrels last week, holding a net long position equivalent to a record 903 million barrels of oil. The combined net long position has a notional valuation of more than $49 billion.

Barkindo, according to a new research note to clients, expects global inventories to fall, which would boost prices.

In the meantime, crude oil inventory data from the United States will potentially guide the markets for the rest of the week.

"The DoE data tomorrow will be where we get our next impetus," said Michael McCarthy, chief market strategist at CMC Markets in Sydney, referring to the US Department of Energy's official weekly numbers on stockpiles.

The data is set to be released on Thursday, a day later than normal, following a US public holiday on Monday. Last week's numbers showed US output helped boost crude and gasoline inventories to record highs, amid faltering demand growth for the motor fuel.

That has kept a lid on prices after they climbed following the agreement by OPEC and other producers to cut output by about 1.8 million barrels per day.