LONDON (Feb 6): Oil steadied near US$57 barrel on Monday as OPEC supply cuts and rising tensions between the United States and Iran were countered by ample inventories and signs that higher prices will revive US output.
The Trump administration's new sanctions against Iran, though not affecting oil output, raised concern about the potential for further developments that could hinder export growth in OPEC's third-largest producer.
US energy companies added oil rigs for a 13th week in 14, data showed on Friday. Despite the OPEC cuts, US crude inventories rose by more than expected last week.
Brent crude was trading at US$56.86 a barrel by 1223 GMT, up 5 cents, having touched an intra-day high of US$57.13. US crude was up 15 cents at US$53.98.
"The tug-of-war between oil bulls and bears continued last week and there are no clear signs who could turn out to be the winner," said Tamas Varga of oil broker PVM.
"The result is a rangebound market where buyers shy away on a pop over US$57 basis Brent, but they feel a dip to the US$54 level is an attractive purchase."
Tension between Tehran and Washington has risen since an Iranian missile test that prompted the United States to impose sanctions on individuals and entities linked to the Revolutionary Guards.
"The growing tensions between the US and Iran are ... having a price-supportive effect," Commerzbank said, adding that, while the sanctions don't affect output, "this could change if the situation were to escalate."
Iran has been raising crude output since most international sanctions over its nuclear program were lifted in 2016.
Tehran is exempt from the supply cuts agreed by OPEC alongside Russia and other independent producers. Implementation of the cuts began on Jan 1 with the aim of reducing output by almost 1.8 million barrels per day.
The OPEC members included in the deal have implemented at least 80% so far, according to a Reuters survey and analysts. Russia has cut about 100,000 bpd and plans to increase that to 300,000 bpd.
Against this backdrop, more investors are betting on rising prices despite indicators such as the Baker Hughes rig count pointing to increased US supply.
Investors raised their net long US crude futures and options positions in the week to Jan 31, the Commodity Futures Trading Commission said on Friday.