Oil prices edged higher on Tuesday, February 21, as investors held onto their bullish positions, betting on the supply to tighten as major oil producers cut their output.
The April contract for global crude benchmark Brent LCOJ7, +1.53% was up 91 cents, or 1.6%, to $57.09 a barrel while its U.S. counterpart West Texas Intermediate CLH7, +1.74% gained 90 cents, or 1.7%, to $54.31 for March deliveries.
Trading activity has been muted in the early sessions of this week, according to Olivier Jakob from the Switzerland-based Petromatrix, and this is reflected in the timid price action of Monday.
Optimism in the market stems from a compliance rate of over 90% from a group of oil producers who have agreed to curtail their production. The pact, signed last year, calls for the group to cut their collective daily production by 1.8 million barrels.
This joint effort by the Organization of the Petroleum Exporting Countries and 11 other non-cartel producers is expected to push global oil prices to $60 a barrel by the end of the year, despite the growth in U.S. supply, said Gordon Kwan, the head of Asia oil and gas at Nomura.
BMI Research notes crude exports from the U.S. reached a record high in the week ended February 10, with most of the volume directed to Asia — the fastest growing market and the longstanding battleground for OPEC nations.
In fact, OPEC’s top producers are prioritizing trades with Asia over the U.S. and Europe in order to maintain market shares, the firm added.
Nymex reformulated gasoline blendstock for March RBH7, +0.32% the benchmark gasoline contract fell 116 points to $1.5050 a gallon, while March diesel traded at $1.6465, 101 points higher, Marketwatch reports.
ICE gas oil for March changed hands at $497.00 a metric ton, down $0.50 from Monday’s settlement.