OPEC oil output falls 1.07 million bpd in January -Reuters survey

OPEC oil output falls 1.07 million bpd in January -Reuters survey

American production has now risen to nearly nine million barrels a day, with the rig count still growing.

The scramble to replace the Saudi, Chinese and other sour barrels has turned price dynamics on their head.

The U.S. Energy Information Administration is to release weekly data on oil and gasoline stockpiles. Although we haven't seen the numbers from the non-OPEC producers yet.

Oil prices rose almost 2 percent on Tuesday after news OPEC oil production has fallen sharply this month and the dollar sank. In the wake of the OPEC announcement, Russian Federation also cut its drilling operations. "We think this is good, because we think it will be needed", Mr. Schieldrop said.

The OPEC-engineered price rally has spurred a surge in drilling in the USA shale patch.

"The rebalancing in the market will certainly happen, but with supplies increasing in the US, prices will move in a tight range", said Thiagarajan, adding that prices may move with a "bullish bias" through 2017 because of the OPEC pact on trimming output.

Additionally, increased USA crude oil production coupled with lower driving demand has kept downward pressure on the national average price at the pump, which has fallen for 21 consecutive days. First resistance within the range is at the January 12/17 highs near $54.30/barrel.

On Monday, oil futures lost ground over concerns of increasing USA oil production, as the latest United States oil rig count released by oil driller Baker Hughes on Friday showed that U.S. rig count increased by 18 to 712 following the prior week's increase of 35.

Analysts will keep a close eye on how OPEC output cuts and increased USA production impact the market moving forward.

Iran's oil minister Bijan Zanganeh said on Monday he expected oil prices to remain at around $55 a barrel this year, according to Mehr news agency.

Data from the CME Group indicated open interest in crude oil futures rose 17,416 contracts or 0.80% during last Friday's selloff and increased another 16,305 contracts during Monday's 1.1% decline.

"Direct oil market fundamental news seemed more mixed, with Iran claiming output in line with its OPEC agreement when the production level cited was still more than 100,000 bpd above its target and US refiners still shutting more units for planned maintenance work", Tim Evans said. "When that happens there will be a big shift in investor sentiment".

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