Oil prices steadied on Tuesday as lower production by OPEC and other exporters balanced growing evidence of a revival in U.S. shale production and sluggish demand.
Benchmark Brent crude <LCOc1> was trading at $55.72 per barrel by 0850 GMT, unchanged from the last close. On Monday, the Brent futures contract closed down $1.09 a barrel. U.S. crude <CLc1> was unchanged at $53.01 after closing down 82 cents on Monday.
Price support was coming from an effort by the Organization of the Petroleum Exporting Countries and other exporters to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017.
But, while OPEC and Russia have together cut at least 1.1 million bpd so far, rising U.S. production, as well as signs of slowing demand growth, threaten to undermine these efforts.
“The general perception is that OPEC is cutting production, which is supporting prices, but high stock levels, rising rig counts and growing U.S. production are capping gains,” said Tamas Varga, analyst at London brokerage PVM Oil Associates.
Since the beginning of the year, both crude contracts have traded within a $5 per barrel price range, suggesting a lack of strong price momentum in either direction.
“$55 per barrel is quite obviously the pivot point in this market … and it has been for some time,” said Matt Stanley, a fuel broker with Freight Investor Services (FIS) in Dubai.
There are concerns that U.S. gasoline consumption, a pillar for crude oil demand, is stalling.
Gasoline stockpiles rose by almost 21 million barrels in the first 27 days of 2017, compared with an average increase of less than 12 million barrels at the same time of year during the previous decade, according to official inventory data, implying either stalling demand or ongoing oversupply.
In China, the second biggest oil consumer behind the United States, crude oil import demand is set to soften during the first half of the year as refinery maintenance results in less demand and after independent refiners were given a lower annual crude import quota, BMI Research said.
Source: Reuters (By Christopher Johnson; Additional reporting by Henning Gloystein in Singapore; editing by Jason Neely)