Oil climbs as firm demand absorbs ample supply
LONDON (Reuters) — Oil rose on Tuesday as demand soaked up some of the surplus supplies from OPEC and the United States, but traders said the market was trading in a tight range and showed few signs of big short term moves.
Benchmark Brent crude was up 70 cents at $49.12/bbl by 1150 GMT, while US light crude oil was 65 cents higher at $46.67.
"We're stuck in a range that ... will be tough to break out of without some kind of political factor coming into play," Matt Stanley, fuel broker at Freight Investor Services, said.
In a sign of strong demand, data on Monday showed refineries in China increased crude throughput in June to the second highest on record.
But many markets are well supplied and oil for prompt delivery is trading at heavy discounts to forward futures in several parts of the world. As a result, crude oil prices are trading at only around half the levels seen 3 yr ago.
A deal by the Organization of the Petroleum Exporting Countries with Russia and other non-OPEC producers to cut supplies by around 1.8 MMbpd between January this year and March 2018 has so far failed to tighten the market or push up prices.
Although many OPEC countries have restricted production, others including Nigeria and Libya have been allowed to increase output.
Ecuador, a small producer within OPEC, said on Tuesday it was not cutting its production by 26,000 bpd as agreed due to the country's fiscal deficit.
Oil Minister Carlos Perez said Ecuador was cutting only 60% of that figure, putting current output at 545,000 bpd.
"We are not meeting the quota imposed on us because of the obvious needs the country has," Perez said.
US oil production is also rising steadily.
The US Energy Department said in a report US shale oil output was likely to rise for the eighth consecutive month in August, climbing 112,000 bpd to 5.585 MMbpd.
"With little sign of the OPEC-shale tug of war drawing to an end, the scene is now set for a period of range-bound trading as market players await the next price catalyst," Stephen Brennock at brokerage PVM Oil Associates said.
Reporting by Christopher Johnson; Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson and Alexander Smith
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