Oil prices rose on Monday, supported by strong demand and uncertainty over the conflict in Syria, although another run-up in U.S. drilling activity kept a lid on gains.
Brent crude futures, the international benchmark for oil prices, were at $55.49 per barrel at 0701 GMT, up 25 cents, or 0.45 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were up 25 cents, or 0.46 percent, at $52.48 a barrel.
ANZ bank said that strong oil demand and “an unsettled global backdrop (is) leaving the market very finely balanced.”
However, another increase in U.S. oil drilling – for the 12th straight week and taking the count to 672 rigs, which is the highest since August 2015 – kept markets from breaking last week’s one-month highs of over $56 per barrel.
U.S. bank Goldman Sachs said after the rig data release that year-on-year U.S. oil production “would rise by 215,000 barrels per day in 2017” once a backlog of production waiting to be brought back online was taken into account.
The soaring U.S. output contrasts with a supply cut led by the Organization of the Petroleum Exporting Countries (OPEC), which hopes to prop up prices by reducing supplies in the first half of 2017 – and maybe beyond.
“The U.S. rig count continues to soar and we are close to a two-year high on that. Judging by the relative success of the OPEC agreement keeping prices propped up, I don’t see a reason for that to decline in the near future,” said Matt Stanley, a fuel broker at Freight Services International (FIS) in Dubai.
“Reduced OPEC volumes and stronger U.S. output will result in a deeper discount for U.S. crude and support greater exports from the U.S. to Asia over the coming months,” BMI Research said. It added, though, that in terms of overall volumes, “the U.S. will remain a small player in Asia as OPEC actively protects its market share.”
Beyond the United States, other producers are also benefiting from OPEC’s supply cuts and tighter market.
Brazil’s oil exports have soared 65 percent since February 2016, to a record of more than 1.46 million bpd, according to government data obtained by Reuters.
Consultancy Wood Mackenzie estimates Brazil oil exports will hit an average of nearly 1 million bpd for the whole of 2017, up from 798,000 bpd last year.