Crude oil extends gains, but upside limited as dollar edges up

Opec giants plan super group to stabilise oil market

"Oil got mild support from gains in Asian equity markets, but has been getting pressure from the rise in US rig count and a slight recovery in the dollar".

Brent futures rose 55 cents or 0.85% to US$65.39 per barrel, while West Texas Intermediate (WTI) grew 78 cents or 0.78% to US$62.46 per barrel.

Brent crude, however, eased as a result of a dip in Asian stocks and a stronger dollar, which potentially curbs demand as it makes fuel more expensive for countries using other currencies.

Brent for April settlement added 89 cents to $65.73 on the London-based ICE Futures Europe exchange. Kuwait plans to add 225,000 bpd of capacity by end March; Iran's oil minister is saying it could add 100,000 bpd immediately after the expiration of the output cut agreement; Iraq said it would hit 5 million bpd of capacity by the end of the year, whereas the UAE seems set to add a whopping 500,000 bpd, late in 2018.

More fundamentally, oil markets got a push from comments by Saudi Arabia, the de-facto leader of the Opec, voicing support for production cuts backed by Opec and other producers including Russian Federation since 2017 in an effort to tighten the market and prop up prices.

The split of the two major crude benchmarks has shrunk WTI's cut rate to Brent by less than $3 per barrel, compared to more than $7 late past year.

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Global oil demand for 2018 was estimated to grow by 1.6-million barrels a day due to an "encouraging environment", he said. A stronger dollar on Tuesday saw most commodity prices - which are denominated in the United States currency - fall.

While Nigerian government officials say one thing and independent producers are doing the opposite, the rest of the oil-producing world is looking nervously on, hoping that other countries won't begin to follow Nigeria's lead and ramp up their own production, causing the tenuous OPEC deal to fall apart.

Oil output in the country is already at 10.27 bpd, a record that put the U.S. just behind Russian Federation and ahead of Saudi Arabia, two of the world's top oil producers. "By the end of this year, it might also overtake Russian Federation to become the global leader", IEA added.

Helping to limit gains are general concerns over rising USA production that may be offsetting the OPEC-led group's attempts to limit production, reduce the global supply glut and stabilize prices.

The American Petroleum Institute said last Tuesday that U.S. crude inventories rose by 3.9m barrels in the week to Feb 9, to 422.4m.

Other commodities such as the gold edged lower on Tuesday, as the dollar's continuous recovery puts the yellow metal under pressure.

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