Oil prices were little changed on Tuesday, trading in a tight range as rising U.S. shale output offset OPEC crude production cuts, with investors seeking clearer direction from upcoming inventory data and comments from senior oil officials. Brent crude LCOc1 was up 18 cents at $56.19 a barrel as of 1155 GMT (0655 EST). U.S. West Texas Intermediate (WTI) crude CLc1 was up 20 cents at $53.40. Both benchmarks have hovered in negative and positive territory since the start of the day’s Asian trading.
Oil prices have been entrenched in a $3 band since February, failing to take off after OPEC implemented, to a surprisingly high degree, the first production cut in eight years. Capping any upsurge has been an increase in U.S. shale oil drilling after WTI rose firmly above $50 a barrel in December following OPEC’s sealing of the deal, which also included several non-OPEC producers such as Russia. “Market-wise, we have seen open interest on Brent fall to a six-week low as non-performing or even loss-making longs have begun to reduce exposure,” said Ole Hansen, Saxo Bank’s head of commodity strategy.
Fund managers doubled their net long positions in Brent, WTI and options to 951 million barrels between the start of November and Feb. 21, betting OPEC’s high compliance with the cut agreement would push up prices. But with Russia’s lackluster participation in the cuts, rising shale output and signs that OPEC countries increased their crude exports in February after a January reduction, that bullish sentiment has wavered.
Oil company executives, energy ministers, including from Saudi Arabia and Russia, and other top officials such as the head of OPEC are meeting in Houston this week for the CERAWeek energy conference. Observers are keen for any comments that may indicate whether OPEC would extend its output reduction. Russia and Iraq said it was too early to discuss that issue, but OPEC’s secretary-general as well as Saudi officials are expected to speak later on Tuesday. Russia also promised to implement its 300,000-barrels-per-day share of production cuts by the end of April.
Brokerage Marex Spectron, however, said it expects production and exports from Russia to rise gradually. “If our expectations materialize, we will see a quick deterioration of the short-term supply conditions.” Markets await U.S. oil stocks data from industry group API on Tuesday and the Energy Information Administration on Wednesday. U.S. oil stocks are expected to have risen for the ninth consecutive week to a record, a Reuters poll showed.