Oil gains as bullish bets on
rising prices hit record high
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[February 27, 2017]
By Ahmad Ghaddar
(Reuters) - Oil prices rose on Monday as investors showed record
confidence in prices rising further, though gains were capped by the
prospect of faster growth in U.S. oil production.
Brent crude oil rose 52 cents to $56.51 a barrel by 1224 GMT,
while U.S. West Texas Intermediate added 42 cents to $54.41.
Investors raised their bets on rising Brent crude oil prices to a new
high last week, data from the InterContinental Exchange showed on
Monday, breaking the 500,000-lot mark for the first time on record.
Money managers also raised their bullish U.S. crude futures and options
positions in the week to Feb. 21 to the highest on record, the U.S.
Commodity Futures Trading Commission (CFTC) said on Friday.
Investors now hold 951,312 lots' worth of U.S. and Brent crude futures
and options, equivalent to nearly 1 billion barrels of oil and valued at
more than $52 billion, based on current Brent and WTI benchmark prices.
"With speculators increasing their bullish bets on U.S. crude to an
all-time high, the risk of disappointment and subsequent downward spiral
in prices has never been greater," oil brokerage PVM's Stephen Brennock
Among the risks is the level of compliance to the deal between the
Organization of the Petroleum Exporting Countries (OPEC) and other
producers to bring down oil output by about 1.8 million barrels per day
OPEC's record compliance with the deal has surprised the market, and the
biggest laggards, the United Arab Emirates and Iraq, have pledged to
catch up with their targets.
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A natural gas flare on an oil well pad burns as the sun sets outside
Watford City, North Dakota January 21, 2016. REUTERS/Andrew Cullen
The International Energy Agency put OPEC's average compliance at a
record 90 percent in January. Based on a Reuters average of production
surveys, compliance stands at 88 percent.
A Reuters survey of OPEC production later this week will show compliance
Looming over the success of the deal is the reaction of U.S. shale
producers to rising prices and their ability to increase output.
U.S. drillers added five oil rigs in the week to Feb. 24 to 602, the
most since October 2015, energy services firm Baker Hughes Inc <BHI.N>
said on Friday.
Over the past two weeks the U.S. implied shale oil rig count went up by
"[This] is marginally higher than our projected 7 rigs per week for
first half 2017," wrote Nordic bank SEB chief commodities analyst Bjarne
The bank has adjusted its dynamic price forecast for 2019 marginally
lower, from $68.30 a barrel to $67.90.
(Additional reporting by Naveen Thukral in Singapore; Editing by David
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