Crude oil prices steadied on Friday after slumping to a three-week low overnight, but pressure from increasing USA production and hefty global stocks are expected to constrain prices.
OPEC is trying to end the global supply glut with quotas of its own, but rising non-OPEC production, especially from the US, threatens to keep oil below $55 a barrel for the time being. OPEC sources told Reuters last month that the group could extend the pact with non-members or even apply deeper cuts from July if global crude inventories fail to drop to a targeted level.
US crude oil production appears to be rising strongly thanks to increased shale drilling as well as rising offshore output from the Gulf of Mexico.
Though the addition was below analysts' expectations of a 3.1 million barrel increase, successive eight straight weeks of addition have kept oil prices under check.
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Given that the 10 OPEC members participating achieved 91% compliance with their October baseline and that Russian Federation reduced output by 118,000 b/d in January from an overall target of 300,000 b/d in first-half 2016, it could be argued that there is not much more to come from the countries keenest to comply and make the deal a success. Gasoline inventories decreased by 0.5 million barrels last week, while distillate fuel inventories decreased by 0.9 million barrels last week.
Most OPEC countries typically overshoot their pledged amounts by about 20 percent. USA crude imports fell 14 percent to an average 7.29 million barrels a day for the week ended February 17.
"While constructive, we continue to view Saudi Arabia's willingness to sacrifice market share beyond its commitment to OPEC as more of a temporary sprint than a more sustainable effort", Tim Evans, Citi Futures' energy futures specialist, said in a note.
As for the demand outlook, it remains relatively strong, with oil consumption forecast to grow between 1.2-1.62 million b/d in 2017 and, according to the EIA, by 1.46 million b/d in 2018. The April traded at $2.788 per million British thermal units, down 1.6 cents, or 0.6%.