On Thursday, oil prices increased after sharp losses the session before, sustained by strong compliance with touted international production reductions, although an increased in U.S. crude inventories continued to drag.
The Organization of the Petroleum Exporting Countries (OPEC) and other oil producers reached a deal the previous year to reduce production by nearly 1.8 million barrels per day (bpd) in the first half of 2017, with investors carefully watching the level of compliance with the landmark agreement.
On Wednesday, Kuwait’s oil minister stated that OPEC’s compliance with the reductions had exceeded targets, standing at 140% in February, while non-OPEC members compliance was 50-60 percent.
International Brent crude futures increased 46 cents, or 0.87%, at $53.57 per barrel at 0342 GMT. They ended the last session down 5% at $53.11 a barrel, hit by a record increased in U.S. inventories.
U.S. benchmark West Texas Intermediate (WTI) crude futures gained 34 cents, or 0.68%, to $50.62 a barrel. West Texas Intermediate plunged 5.38% to $50.28 per barrel in the prior session, indicating its lowest since December.
The increase in prices on Thursday could be momentary, according to the report, stated by Michael McCarthy, chief market strategist at Sydney’s CMC Markets.
“One of the factors (pressuring prices) is the strengthening U.S. dollar on U.S. rate hike (expectations),” McCarthy said.
The U.S. dollar index increase on the back of stronger than expected U.S. jobs data and rising expectations that the Fed Reserve could increase U.S. interest rates the upcoming week. A stronger greenback makes dollar-denominated oil more expensive for importing countries.
United States crude inventories, the world’s top oil consumer, increased last week by 8.2 million barrels, generously beating forecasts of a 2 million barrel build.
“When combined with the huge speculative long positions in the market, it’s not surprising that prices sold off so strongly,” ANZ said in a note. “However, there is increasing talk of extending the OPEC production cut agreement.”
On March 26, Kuwait is scheduled to host a ministerial meeting, attended by both OPEC and non-OPEC members to review compliance with the crude production cuts.
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