NEW YORK (Feb 21): Oil prices rose about 2 percent to near three-week highs on Tuesday after OPEC said it was sticking to its agreement to cut production and hoped compliance with the deal would be even higher as it expects other producers join its efforts to curb a global glut.
OPEC Secretary General Mohammad Barkindo told an industry conference in London that January data showed conformity from participating OPEC nations with output curbs had been above 90 percent and oil inventories would decline further this year.
"All countries involved remain resolute in the determination to achieve a higher level of conformity," Barkindo said.
The Organization of the Petroleum Exporting Countries and other producers outside the group agreed in November to cut output by about 1.8 million barrels per day (bpd) in an effort to drain a glut that has depressed prices for over two years.
Barkindo said it was too early to say if the supply cut, which lasts for six months from Jan 1, would need to be extended or deepened at the next OPEC meeting in May.
"While Barkindo's statement puts a confident spin on market fundamentals, we'd say questions do remain, given that Iran seems to be signaling increased production rather than improved compliance," Tim Evans, an energy futures specialist at Citi Futures said in a note.
Under the deal, Iran was allowed to boost output from its October level and Tehran expects its oil production to reach 4 million barrels per day by mid-April.
Brent crude futures traded at US$57.08, 90 cents or 1.6 percent higher by 11:17 a.m. EST (1617) GMT after hitting the highest since Feb. 2 at US$57.31.
US light crude was up US$1.07, or 2 percent, at US$54.47, after peaking at US$54.68, its highest since Jan 3. Futures for delivery in March were set to expire at the end of the trading session.
The more active US crude futures for April delivery were up 1.9 percent at US$54.81.
From a technical perspective, the tight consolidation above last year's key broken resistance levels suggests oil prices have been coiling to break higher, said Fawad Razaqzada, technical analyst for Forex.com.
"I am anticipating both oil contracts to break out of their recent ranges and head higher."
OPEC cuts have spurred a speculative move into crude oil that has pushed prices towards the top of their recent ranges.
Money managers hold the highest number of net long Brent and US crude futures and options on record, data showed on Monday and Friday, betting on higher prices to come as OPEC and other key exporters reduce production.
"Should there come a time when these speculative positions decide to unwind, oil prices will be in for a significant correction," said Jonathan Chan, an investment analyst at Phillip Futures.
Still, the Relative Strength Index (RSI) in US crude futures remained at about 58 on Tuesday, well below the overbought level of 70, Reuters data showed.