Oil steady but record U.S. stocks weigh on sentiment

Oil steady but record U.S. stocks weigh on sentiment

Analysts say the oil market is balanced between these twin pressures: OPEC cuts and rising USA inventories and production.

"However, if crude prices are to break out of their recent range in the next few weeks, the risk is to the downside". Eastern, off the settlement of $55.97 a barrel, which was up 38 cents but well off the session high of $56.46 a barrel.

USA natural gas futures fell to a three-month low on Thursday for March delivery on the New York Mercantile Exchange, and ended down 2.80% to $2.843 per million British thermal units.

Another difficulty facing market bulls is seasonal weakness, as refinery demand typically slows in January and February as refiners perform winter maintenance.

Late Wednesday morning, Brent crude was down 18 cents at $55.79 USA, after briefly turning positive.

A report by BMI research revealed that the compliance rate of 40 percent only by Iraq, OPEC Company's second largest producer could become problematic to the cohesion "group wise" as all the others are going beyond the targets to meet their overall set goals.

USA crude has been supported in a US$50 to US$55 a barrel range since late past year by the expectation of output cuts, but more evidence of market rebalancing is needed to maintain prices in this range, Tradition's McGillian said.

OPEC and other exporters including Russian Federation agreed past year to cut output by 1.8 million barrels per day (bpd) to reduce a price-sapping glut.

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But "how much longer it takes for OPEC's cuts to show up in inventory data remains to be seen", he said. "The products will go down later", a third OPEC source said.

USA crude imports averaged 8.5 MMBPD, down 881,000 BPD from the previous week's average.

Kuwait is the latest nation to make headlines for announcing that it will boost, rather than cut, oil production once the Organization of the Petroleum Exporting Countries (OPEC) output reduction agreement expires in June.

Some traders said upcoming oil field maintenance across the Middle East might help the group achieve production cuts.

Talks of possibly extending the supply cut time frame come at time when the USA production is showing a strong revival.

Eleven non-OPEC countries, led by the world's largest oil producer, Russia, subsequently pledged to lower their production in concert by a combined 558,000 b/d.

"People got pretty close to the abyss and looked down, and it was pretty deep", the oil historian said in an interview with Bloomberg.

Most analysts believe prices will increase steadily now that OPEC has made a decision to cut production.