il prices edged off earlier gains to end Tuesday nearly unchanged, as the support from OPEC’s plan to limit production were undercut by an energy watchdog’s assessment of how much those nations are currently producing.
U.S. crude CLc1 futures, which hit a high of $53.41 a barrel in early trading, settled up just 15 cents to $52.98 a barrel, losing ground late in the session.
Brent crude LCOc1 ended up three cents to $55.72 a barrel.
The market has rallied smartly for several weeks in the run-up to and aftermath of OPEC’s first agreement to cut production in eight years. That was followed by a similar agreement this past weekend by non-OPEC countries, including Russia, to limit their output as well.
Traders said there was significant profit-taking after oil shot to mid-2015 highs earlier this week, boosted by the deal reached by the Organization of the Petroleum Exporting Countries and other exporters to cut output by a combined 1.8 million barrels per day (bpd).
The deal helped U.S. crude gain more than 20 percent in about a month, leading some brokerages to expect some profit-taking, particularly as it is unclear whether the proposed cuts can be maintained.
However, the International Energy Agency said on Tuesday it believes OPEC produced about 34.2 million barrels a day in November, or an additional 500,000 bpd from OPEC’s estimate. Even though the IEA raised its forecast for global oil consumption, this undercut expectations for the dramatic effort by OPEC.
“There were some details in the IEA report that were negative, mostly along the lines of OPEC production numbers and Saudi production numbers, versus what OPEC was leading everybody to believe,” said Robert Yawger, director of the futures division at Mizuho Securities USA.
In its monthly oil market report, the IEA said revisions to its estimate of Chinese and Russian consumption had prompted it to raise its forecast for global oil market demand growth this year by 120,000 barrels per day to growth of 1.4 million bpd.
Analysts said prices would turn quickly if the market believed compliance was lacking.
“The following three to six months will provide us with an answer as to whether the foundation is strong enough to hold the building or will it collapse like a house of cards,” PVM analysts wrote.
Analysts said oil traders also pulled back ahead of weekly figures from the American Petroleum Institute due late Tuesday afternoon, a precursor to U.S. Energy Department figures on stockpiles on Wednesday morning.
Source: Reuters (By David Gaffen; Additional reporting by Henning Gloystein and Keith Wallis in Singapore; Editing by David Gregorio and Will Dunham)