The rising tensions between the United States and Iran and Organisation of Petroleum Exporting Countries, OPEC, supply cuts were countered by ample inventories and signs that higher prices will revive U.S. output as oil gains momentum selling for about $57 per barrel.
U.S. energy companies added oil rigs for a 13th week in the last 14, data showed last Friday.
Despite the OPEC cuts, U.S. crude inventories increased more than expected last week. Benchmark Brent crude traded at $56.75 a barrel, down 6 cents, while U.S. crude was up 4 cents at $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 range-bound market where buyers shy away on a pop over $57 basis Brent but they feel a dip to the $54-level is an attractive purchase.”
Tension between Tehran and Washington has risen since an Iranian missile test which prompted U.S. 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 U.S. 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 January 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 percent so far, according to a Reuters survey and analysts.
Russia has cut output by about 100,000 barrel per day, 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 U.S. supply.
Investors were said to have raised their net long U.S. crude futures and options positions in the week to January 31 to a record 412,380 lots, the Commodity Futures Trading Commission said on Friday.