Oil rises, but swelling US output caps rally

Oil prices inched higher, as investor optimism over the effectiveness of producer cuts

Oil prices inched higher on Monday, as investor optimism over the effectiveness of producer cuts encouraged record bets on a sustained rally, although growing US output and stubbornly high stockpiles kept price gains in check. 

Top Organization of the Petroleum Exporting Countries (Opec) exporter Saudi Arabia’s crude oil shipments fell in December to 8.014 million barrels per day (bpd) from 8.258 million bpd in November, official data showed on Monday.

Brent futures were up 37 cents at $56.18 a barrel at 1:05 p.m. EST (1805 GMT), while US West Texas Intermediate crude was up 29 cents, or 0.5 per cent, at $53.69 in very thin trading. 

The US market is closed on Monday for the Presidents Day holiday. WTI futures for delivery in March expire Tuesday. 

Prices got a slight lift from a weaker dollar as well. A strong greenback typically makes oil more expensive for holders of other currencies. 

The Opec and other producers, including Russia, agreed last year to cut output by almost 1.8 million bpd during the first half of 2017. 

Estimates indicate compliance with the cuts is around 90 percent. Reuters reported last week that Opec could extend the pact or apply deeper cuts from July if global crude inventories fail to drop enough.  Investors have certainly taken Opec members at their word on their commitment to cut production and now hold more crude futures and options than at any time on record.