Oil stuck near US$57 as Iran, OPEC countered by US drilling rebound

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LONDON (Feb 6): Oil steadied close to US$57 barrel on Monday as rising tensions between the United States and Iran and OPEC supply cuts were countered by ample inventories and signs that higher prices will revive US output.

US energy companies added oil rigs for a 13th week in the last 14, data showed on Friday. Despite the OPEC cuts, US crude inventories increased more than expected last week.

Brent crude was trading at US$56.75 a barrel at 1000 GMT, down 6 US cents, trading in a narrow 46-cent range. US crude was up 4 US cents at US$53.87.

"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 which prompted US President Donald Trump's administration last week to impose sanctions on individuals and entities linked to the Revolutionary Guards.

However, a Revolutionary Guards commander said at the weekend Iran would use its missiles if its security is under threat.

"The move by the US to impose new restrictions on Iran ... does raise the risk of further tensions disrupting (oil) supply," ANZ bank said.

Iran, OPEC's third-largest producer, has been raising output gradually since most international sanctions over its nuclear programme were lifted in 2016.

Tehran is exempt from OPEC's plan to cut supplies alongside Russia and other independent producers, which started on Jan 1 and calls for reductions of almost 1.8 million barrels per day.

The OPEC members included in the move have implemented at least 80% so far, according to a Reuters survey and analysts. Russia has cut output by about 100,000 bpd and plans to deepen the reduction to 300,000 by the end of April.

With output being cut, 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 to a record 412,380 lots, the Commodity Futures Trading Commission said on Friday.