Oil edged up on Monday on statements over the weekend from OPEC and other producers that they have been successfully implementing output cuts, but gains were limited by a surge in US drilling.
OPEC and non-OPEC countries have made a strong start to lowering their oil output under the first such pact in more than a decade, energy ministers said on Sunday as producers look to reduce oversupply and support prices.
Ministers said 1.5 million of almost 1.8 million barrels per day (bpd) had already been taken out of the market.
“It is the weaker dollar to start the week and comments over the weekend from OPEC and non-OPEC producer that compliance has been very good, giving a bit of boost to oil prices,” said Jeffrey Halley, senior market analyst at OANDA brokerage in Singapore.
“Oil is trading in a range. In the medium term it is going to be tough for oil to break out. The more oil goes up, the more these shale drillers are going to hedge by the futures.
” Brent crude, the international benchmark for oil prices, was trading at USD55.55 per barrel at 0215 GMT, up 6 cents from its last close. US West Texas Intermediate (WTI) crude futures were up 5 cents at USD53.27 a barrel.
US energy companies last week added the most rigs drilling for new production in almost four years. Drillers added 29 rigs in the week to January 20, bringing the total count up to 551, the most since November 2015, energy services firm Baker Hughes said on Friday.
US oil production has risen over 6 percent since mid-2016, although it remains 7 percent below historic high in 2015. It is back to levels of late 2014, when high US crude output contributed to a crash in oil prices.
On the technical front, Brent may climb up to USD56.55 per barrel, as it has cleared resistance at USD55.43, according to Wang Tao, Reuters analyst for commodities and energy technicals.
Hedge funds rushed to place bullish wagers on US crude oil last week, data showed on Friday.
The US dollar fell against the euro and yen on Tuesday after a drop in oil prices suggested US inflation would stay low and prevent the Federal Reserve from hiking interest rates at a steady pace this year, while risk aversion also boosted the euro and yen.
A weaker dollar makes the greenback-priced commodities cheaper for importer holding other currencies.
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