Oil prices firmed on Friday as rising crude output from the United States was offsetting efforts by OPEC and other producers to prop up the market by cutting supplies.
Brent crude futures (LCOc1), the international benchmark for oil prices, were trading at $56.41 per barrel at 0753 GMT, up 17 cents from their last close.
U.S. West Texas Intermediate (WTI) crude futures (CLc1) were at $53.99 a barrel, up 21 cents.
Trading activity during Asian business hours was low due to the start of the Lunar New Year holiday in most countries of the region, including China and Singapore.
Traders said prices were lifted by production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, aimed at reducing a global fuel overhang.
However, they added that rising output in the United States was partially offsetting those efforts.
“U.S. producer hedging via futures and increasing shale production offset the progress OPEC has made with its production cut implementation,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
“Market participants are hyper-focused on two issues: shale’s response to higher prices and OPEC compliance,” Barclays (LON:BARC) bank said.
“Producers and OPEC countries are all talking their books, yet the jury is still out,” it added, referring to widespread scepticism over compliance with announced cuts.
The British bank said it expected Brent and WTI prices to average $55 and $53 per barrel respectively for the first quarter.
OPEC and other producers have agreed to cut production by almost 1.8 million barrels per day (bpd) for the first half of 2017 to fight a supply overhang that has seen between 1 million and 2 million bpd of crude being produced in excess of consumption over the past two years.
U.S. oil production, however, has risen by around half a million barrels per day since mid-2016 to 8.96 million bpd.
Despite the possibility that the OPEC-led supply reduction might not lift prices much further, investment bank Jefferies gave a bullish outlook for the industry’s profitability based on cost-cutting efforts by all producers.
“Conditions for the integrated oil sector are arguably the most favorable since 2012 (as) company self-help measures have driven break-even prices down to $50 per barrel, while OPEC intervention in the oil markets has likely put a floor on Brent prices in the low-$50’s,” Jefferies analysts said in a note.