On Thursday, oil prices gained following a survey which indicated that OPEC’s commitment to its supply cuts remains intact, although U.S. production surpassed 10 million barrels per day (bpd) for the first time since 1970.
Brent April crude futures were up 53 cents on the day at $69.42 a barrel by 1150 GMT, while NYMEX crude for March delivery increased 42 cents to $65.15 a barrel. Brent crude gained 3.3 percent in January, having its strongest start to the year in five years.
Investors will now have to figure out what is oil’s most prevailing force- rising U.S. crude output, or OPEC’s loyalty to its supply cuts, the relationship with equities and even the dollar’s probability to decline.
“I don’t think it’s durable, that suddenly we see oil and the S&P attached at the hip. They have coincidentally done well and its profit-taking. But I think their fortunes are going to diverge and this correlation won’t survive the test of time,” said analyst Jasper Lawler.
“The other factor is that big $70 level in Brent. That is pretty much the top of the range for most forecasts out there. So again, that’s a price level that gives some pause for thought. I don’t think we should go back to 60 but I think probably 65 seems like a logical area to … start refocusing on the fundamentals of the market versus general sentiment.”
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Goldman Sachs has increased its three-month forecast for Brent to $75, previously $62, and its six-month forecast to $82.50 from $75.
In November, U.S. crude oil production surpassed 10 million bpd for the first time since 1970 and came close to its all-time output record, according to the Energy Information Administration. The EIA also reported on Wednesday the largest increase in crude oil stocks since last March, an increase of 6.8 million barrels.
“As oil prices rise, higher shale output is definitely on the market’s mind,” said Tomomichi Akuta, a senior economist.
Output by the Organization of the Petroleum Exporting Countries (OPEC) also increased in January from an eight-month low as more output from Nigeria and Saudi Arabia counterbalanced the decline in Venezuela. Obedience by OPEC-producers to cut supply increased to 138 percent from 137 percent in December, showing that commitment remains strong even as oil prices reached their highest since 2014.