OPEC said oil producers have kept their promise to cut output in accordance with a landmark deal designed to lift petroleum prices.
As a result, prices rose in February as last year’s accord between OPEC members and some non-members gained traction, the Organisation of the Petroleum Exporting Countries said in its monthly oil report.
The oil price recovery was, however, under threat from fresh supply as high-cost producers in the United States started drilling again, encouraged by the price upswing, as well as from rising Canadian production.
An OPEC oil price reference basket rose by about two percent to an average of $53.37 in February, the organisation said.
“High compliance with supply adjustments by OPEC and some non-OPEC producers supported gains,” it said.
In December, OPEC agreed with 11 non-members, including Russia, to cut output in the first half of this year to push prices higher.
Looking at the oil futures market, a key gauge of pent-up demand, OPEC said a record number of investors were placing wagers on price increases.
“Bets on crude oil prices rising have hit a new record high for the third month in a row, giving additional support to oil prices,” OPEC said.
“Investor optimism over the effectiveness of the production adjustments encouraged record bets on a sustained rally,” it said, adding however that “growing US output and stubbornly high stockpiles kept price gains in check and contained prices within a tight range”.
The oil price has seen a strong recovery from 2016 lows and is currently more than 30 percent up from levels a year ago.
But the rally has been stuttering in recent weeks as a cocktail of threats to the recovery has emerged.
Investors are nervous because of a surprisingly big jump in US stockpiles reported last week, increased US shale production and concerns about implementation of the OPEC-led deal to cut output.
On Tuesday, WTI oil stood at $48.59 per barrel and Brent at $51.77. Both contracts were up on the day, but between four and five percent lower than three months ago.
OPEC does not predict oil prices, but the organisation did revise up its supply outlook for this year in an acknowledgement that fresh drilling in the US was having an impact on efforts to reduce a glut in the market.
“An improving outlook for Canadian oil sands and US supply were the main contributors to the revision” it said.
In February, “growing US output and stubbornly high stockpiles kept price gains in check and contained prices within a tight range”, it noted. Citing a survey by Baker Hughes, an oil firm, OPEC said the number of American oil rigs had risen for seven consecutive weeks and was now 55 percent higher than a year ago.
Oil investors have been wondering whether OPEC might extend its current output deal to counter rising production elsewhere, but the report did not address that question.
Meanwhile, rising global demand for oil will help rebalance the market, OPEC projections showed. The cartel boosted its 2017 outlook for demand growth to 1.26 million barrels per day, an increase of 70,000 barrels a day from last month’s outlook.
“The upward adjustments were due to more optimistic expectations for oil demand in OECD Europe, as well as Asia Pacific,” OPEC said. OPEC’s 13 member countries together produce one-third of the world’s oil.