Oil erased its earlier gains as traders weighed output cuts from OPEC and its allies against expectations for rising U.S. crude inventories.
Futures in New York traded 0.3 percent lower, reversing an earlier increase of as much as 1.2 percent. Russia curbed output by 47,000 barrels a day in January from its October baseline level, the country’s Energy Minister Alexander Novak said. This is slightly slower than its earlier pledge to OPEC. Meanwhile, U.S. government data due Wednesday is expected to show American crude inventories rose for a third week.
Crude has rallied about 20 percent this year as the Organization of Petroleum Exporting Countries cut output by the most in two years, which was part of an output pact with allies including Russia. Rig data signaled U.S. shale drilling is slowing down despite record output from the nation, while a battle for leadership of oil-rich Venezuela threatens further disruption to supplies. Still, there remain lingering concerns about the health of the global economy and a possible impact on oil demand growth.
“There are basically two market drivers: one is thinking the Venezuela sanctions and OPEC cuts are pushing prices up,” says ABN Amro Senior Energy Economist Hans van Cleef. “On the other hand we still see some worries on global growth and that leads to a very small trading range.”
West Texas Intermediate crude for March delivery traded at $54.17 a barrel on the New York Mercantile Exchange, down 39 cents, at 8:05 a.m. in New York, having earlier reached as high as $55.21. The contract declined 70 cents to $54.56 on Monday.
Brent for April settlement lost 39 cents to $62.12 a barrel on the London-based ICE Futures Europe exchange. The contract fell 24 cents to $62.51 on Monday. The global benchmark crude was at a $7.63 premium to WTI for the same month.
Novak said Russia is “fully complying with obligations in line with earlier announced plans to gradually cut output by May,” although the nation had previously said it would reach its target in the first quarter. Still, Saudi Arabia’s Energy Minister Khalid Al-Falih said last month that Russia’s reductions were slower than he would like, although he was certain the country can ultimately contribute to balancing the market.
Output from OPEC’s 14 current members fell by 930,000 barrels a day last month to 31.02 million barrels a day with Saudi Arabia cutting deeper than it pledged, according to a Bloomberg survey of officials, analysts and ship-tracking data.
In the U.S., crude inventories probably increased by 1.5 million barrels last week, according to a Bloomberg survey of analysts before Energy Information Administration data.
Other oil-market news: Italy and Greece have stopped buying oil from Iran despite being granted waivers from U.S. sanctions. Venezuela’s government-in-waiting intends to scrap requirements that state-owned oil giant PDVSA keeps a controlling stake in joint ventures. Guyana, a country that currently produces no crude, could pump more than OPEC member Venezuela in five years. U.S. oil refiners won’t be allowed to complete shipments of Venezuelan crude they booked before the Trump administration slapped new sanctions on the Latin American nation.