By Alison Sider and Kevin Baxter
Oil prices rose Tuesday on the back of data indicating that OPEC's deal to cut production is holding.
U.S. crude futures settled up 27 cents, or 0.51%, at $53.20 a barrel on the New York Mercantile Exchange. The April contract for the global crude benchmark, Brent, gained 38 cents, or 0.68%, to $55.97 a barrel.
The cuts from the Organization of the Petroleum Exporting Countries are providing a tailwind, but most observers believe that it is going to take something extra to push prices out of the current range and toward $60 a barrel. Prices pared gains from earlier trading.
"The market can't really muster enough strength to rally," said Donald Morton, senior vice president at Herbert J. Sims Co., who runs an energy trading desk. "Here we are just sitting parked."
The OPEC data released Monday showed a month-on-month decline of 890,000 barrels a day in January from the previous month to 32.1 million b/d. The drop indicates a 90% compliance level so far by producers who had agreed to curtail their output -- in line with figures reported by the International Energy Agency last week, and well above what many market participants were expecting.
"That's pretty compelling stuff," John Saucer, vice president of research and analysis at Mobius Risk Group in Houston said of the figures, pointing to the IEA's upgrade of its global demand forecast for the year. "It seems like this market is just biding its time before it works its way higher."
If the rate of output reduction continues at the same pace for the next six months, the global oil market could cross to a deficit by the second half of the year when the demand is stronger, said Tim Evans, a Citi Futures analyst.
Still, analysts noted that Iran, Libya and Nigeria continued to ramp up output -- something that could undermine OPEC's efforts.
"None of those countries are necessarily stable in any terms, but if they are able to continue ramping up production, they have the capacity to offset all of the other OPEC cuts," analysts at TAC Energy wrote in a note Tuesday.
Market participants are also awaiting the next set of data on U.S. inventories of crude and fuel, expected to be released Wednesday. Analysts and traders surveyed by The Wall Street Journal expect that crude stockpiles grew by 2.9 million barrels last week.
However, some analysts have said that the large inventory builds in the U.S. have been seasonal and that the extra barrels exported by many OPEC members before the start date of the cuts are now starting to show.
"We have little reason not to believe that thehuge increases in inventories seen over the past month will soon level off," analysts at First Standard Financial wrote in a research note.
Gasoline futures gained 0.21 cent, or 0.14%, to $1.5467 a gallon. Diesel futures rose 1.09 cents, or 1.06%, to $1.6382 a gallon.
Jenny W. Hsu contributed to this article.
Write to Alison Sider at email@example.com and Kevin Baxter at Kevin.Baxter@wsj.com
(END) Dow Jones Newswires
February 14, 2017 16:01 ET (21:01 GMT)
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