Oil near flat in quiet trade, supply outlook unclear

Mon Dec 19, 2016 3:24pm EST
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By Scott DiSavino

NEW YORK (Reuters) - Oil prices were little changed on Monday in quiet pre-Christmas trade as the market waited to see whether U.S. production from shale fields would grow enough to offset planned output cuts by OPEC, Russia and other producers next year.

Brent futures for February delivery lost 29 cents or, 0.5 percent, to settle at $54.92 a barrel, while U.S. West Texas Intermediate crude for January rose 22 cents, or 0.4 percent, to settle at $52.12 per barrel on its second to last day as the front month.

"Nothing is really going on. The dollar is flat. Oil is flat. It's a low margin Christmas trading week, we don't expect much to happen," said Phil Davis, managing partner of venture capital fund PSW Investments in Woodland Park, New Jersey.

A stronger U.S. dollar pressures demand for dollar-denominated crude as it makes barrels more expensive for users of other currencies.

Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said implied U.S. output increases would offset a significant portion of planned OPEC production cuts, "especially since we don't anticipate sustained strong compliance" from OPEC.

"While adherence to (OPEC) cutbacks could be quite high initially, we will be surprised by compliance much above 60 percent by the end of the first quarter as (U.S.) shale responds to a higher-price environment," Ritterbusch said in a note.

U.S. oil output is expected to increase as energy companies last week continued to add oil rigs, extending a seven-month drilling recovery.

As a result, U.S. oil production is edging up, rising from almost 8.7 million barrels per day (bpd) in July to about 8.8 million bpd in December, according to U.S. Energy Information Administration projections.   Continued...

An employee at a Total fuel station waits for customers in south Jakarta February 12, 2015. REUTERS/Darren Whiteside