Oil hits 2015 high of $56 after U.S. output slows
OPEC production is rising even as the U.S. pulls back
Oil was at its highest level this year, climbing to more than $56 U.S. a barrel in trading in New York Wednesday, after a report showing U.S. production was slowing.
West Texas Intermediate crude closed up $2.64 to $55.93 in late afternoon. That's five per cent above its price at the beginning of the year.
'"I'm at a bit of a loss, to be honest. Even if U.S. production is falling, production from the Mideast is increasing."- Dirk Lever, AltaCorp
Brent crude, the most common international contract, was up $3.03 at $62.84 US a barrel.
The oil-sensitive Canadian dollar rose today to 81.27 cents US, following oil's climb.
The impetus for the climb was data released on Tuesday by North Dakota's Department of Mineral Resources yesterday, that showed state oil production slid for the second month in a row in February.
U.S. shale producers are scaling back and closing rigs because of continued low oil prices.
New figures from the U.S. Energy Information Administration showed crude oil inventories in the U.S. rose less than expected last week, just 1.3 million barrels, compared to the 4.1 million analysts had expected.
OPEC production up
The market seemed to discount news from the International Energy Agency that showed the Organization of Petroleum Exporters has increased its output.
OPEC raised output by 890,000 barrels a day to 31.02 million barrels a day in March, the IEA estimated.
The increase in production came mainly from the Saudis, which raised output by raised output 390,000 barrels a day and Iran, which raised output by 1.2 million barrels. There was also increased output from Iraq and Libya.
Analyst says the rise doesn't make sense
Dirk Lever, an energy analyst with AltaCorp, isn't sure what to make of the sudden jump. He says he hopes that we're seeing a turnaround in prices, but he's not convinced.
"I'm at a bit of a loss, to be honest. Even if U.S. production is falling, production from the Mideast is increasing. I think we need more than one month of data."
Lever says he's also concerned that producers will overreact to the price increase and start to ramp up production again, which would undo any progress made so far.
A glut in production, and OPEC's refusal last November to pull back in its output, lead to oil prices declining by 50 per cent in the past year.
Many critics blame Saudi Arabia for the glut, saying the country is attempting to drive U.S. producers out of the market so it can remain as the world's dominant producer of oil.
"OPEC's core Gulf producers — led by Saudi Arabia — appear to be sticking with their defence of market share," the IEA said in its monthly oil-market report. "Lower oil prices and cuts in capex are starting to take their toll" on U.S. production, it added.
Still, it estimates North American producers will pump out 19.5 million barrels a day in 2015, more than the 18.8 million a day produced in 2014.
On the brighter side, the IEA is noting improved demand from China and the EU.